Taking out a credit card refinancing loan can be a great way to pay off your credit cards and still keep your credit rating intact. While a debt consolidation loan is the best option if you can’t afford the high interest rate on your new credit card, refinancing is also a great way to eliminate pesky credit card debt. However, there are several differences between the two.
Debt consolidation involves moving several credit card balances to one single loan. This can be accomplished by consolidating small credit card balances onto a single high credit limit card, but it is more often accomplished through the use of a personal loan. These loans are unsecured, have a fixed interest rate, and a specific loan term. With debt consolidation, you will make the same monthly payment until the loan is paid off.
Credit card refinancing usually comes with a 0% interest rate that lasts for 12 to 18 months. Most credit cards carry an interest rate of 16%-20%. By contrast, debt consolidation loans can come with a high interest rate. The interest rate you receive will depend on your credit score and whether or not you have collateral to put up as collateral. If you have a high credit score, you may be able to get the lowest rate.
Another difference between debt consolidation and credit card refinancing is that debt consolidation can help you consolidate multiple debts into one. Rather than making several monthly payments on a variety of credit cards, you make one payment a month to a single company. This makes budgeting easier and eliminates the risk of missing a payment. So, which is better for you? Debt consolidation or credit card refinancing?
Debt consolidation can be an excellent option for those who have multiple credit cards. While balance transfers are not a bad option for those who can’t afford to pay the high interest rates on each of them, you must make sure that the new card comes with enough credit to accommodate all of your debt. While this type of debt consolidation is less popular, it is still a viable option for those who have a high interest rate.
Credit card refinancing is a great way to lower your interest rates. While 0% introductory rates are great, they always end. You may be paying a higher interest rate on a new card with a higher permanent rate. This is because credit cards come with variable interest rates. What’s more, your introductory 0% interest rate could go up to 19% in a year.
Unlike debt consolidation, credit card refinancing involves taking a credit card with a high interest rate and transferring it to a new line of credit. It might also require a personal loan. You can refinance your balances with credit cards like Citi Diamond Preferred, which offers 0% introductory APR for the first 21 months. The only downside to this option is that you must pay a balance transfer fee of between 3% and 5% of the total balance.