You may be comparing credit card refinancing vs debt consolidation when your current credit card balance or debt has high interest rates. In other cases, you could be looking to refinance your credit card or debt if the outstanding balance is too intimidating for you to pay in full. Credit card refinancing vs debt consolidation is also considered if you are not comfortable with the terms of your current debt.
Get Your Personal Loan Today
From $250 to $35,000
✓ Free-to-use service
✓ Loans for any occasion
✓ Extended lender network
✓ Easy loan request form
Get up to $5,000
✓ Extended lender network
✓ 100% Free Services
✓ 24/7 support
✓ Privacy assured
Request up to $10,000
✓ Sbmit request online
✓ Free service
✓ Loans for any occasion
✓ Online Privacy assured
What Is the Difference Between Credit Card Refinancing Vs Debt Consolidation
The major difference between credit card refinancing vs debt consolidation is on the number of debts merged. For credit card refinancing, you are taking a new loan to finance your existing credit card debt. For debt consolidation, you combine multiple loans and pay them off altogether. You are left with one loan, which you are committed to financially.
Credit Score Implications of Credit Card Refinancing Vs Debt Consolidation
When comparing credit card refinancing vs debt consolidation, both adversely affect your credit score. At first, when you take any of these, your credit score may decrease.
There are many reasons for this decrement, one of them being a hard inquiry. Lenders make hard inquiries before they consolidates your debt or refinances your credit card. Hard inquiries negatively affect your credit score in most credit scoring models.
If you pay your new loan on time without defaults, your credit score bounces back quickly, majorly after a year. This bouncing back may improves your credit score beyond your previous high score before refinancing your credit card or consolidating your loan(s).
Which Is Better Between Credit Card Refinancing Vs Debt Consolidation
The choice for either credit card refinancing or debt consolidation largely depends on your debt status. You should evaluate the pros and cons of credit card refinancing vs debt consolidation to know which suits you the best.
Pros of Credit Card Refinancing Vs Debt Consolidation
I. Pros of Credit Card Refinancing
1. You switch to lower interest rates: You can secure a loan or new credit card with lower interest rates than your existing one. Lower interest rates on a loan or new credit cards make it easy to pay off debts efficiently. Therefore, it saves you the money you would have paid in service of a credit card debt with high-interest rates.
2. Debts consolidation: If you have several outstanding credit card balances, refinancing can consolidate them into a single loan or credit card. This simplifies the repayment process, making it easier to account for your finances and track your repayment progress.
3. Increases your chance to improve your credit score: You can raise your credit score if you service your new credit card or loan. Consistently making payments on or before dew demonstrates responsible financial accountability. A higher credit score can qualify you for more loans with even lower interest rates in the future.
4. Simplified debt tracking: Refinancing gives you a chance to combine multiple debts into a single one. Instead of juggling to pay multiple credit card bills on different due dates and varying interest rates, you only have a single due date and interest rate to manage per payment. You enjoy a significantly reduced stress level and, consequently, better organization of your debt repayment.
5. The possibility of faster debt repayment: The lower interest rates are reasonably more manageable payments. Since credit card refinancing can position your debt status at a lower interest rate, it accelerates your debt payoff.
II. Pros of Debt Consolidation
1. Simplified loan repayments: When you combine multiple loans with debt consolidation, you don’t worry about keeping up with different repayment dates as they fall due. Simplified loan repayment enhances budgeting your finances as you can prepare in advance for a due date to pay your new lender.
2. Lower interest rates: The new lender may allow you lower interest rates after consolidating multiple loans. This happens if your credit score is still great and you have never defaulted on a payment of the existing loan you wish to consolidate.
Cons of Credit Card Refinancing Vs Debt Consolidation
I. Cons of Credit Card Refinancing
1. Fees and costs: A new credit card or credit refinance loan is likely to come with its associated fees and costs. Please review the applicable fee and costs and ensure the potential savings from refinancing outweigh the fees and costs.
2. The potential of accumulating new debt: You could still fall back into old spending habits on full repayment of your existing credit card balance. A lack of financial accountability could see you accumulating new debts on your newly freed-up credit limits. If you’re still spending emotionally and can’t get over it, you may find yourself in a worse financial situation than before.
3. You could lose assets: If your refinancing loan is secured, you are risking the collateral in question. In case of a loan default, your lender could effect legal permission to auction such assets to reclaim the default balance.
II. Cons of Debt Consolidation
1. Lengthy application process: A lengthy processing period subjects you to a scenario where you must continue meeting your monthly dues to your existing loan. It may drain you financially as you wait for the approval of debt consolidation.
2. Applicable fee: Some lenders will demand certain fees before they can approve and process your debt consolidation. For instance, the origin fee is among the most common payments demanded by lenders to process your debt consolidation application.
3. Possibility of paying more: By the time you consider debt consolidation, your credit score may have worsened. This contributes to higher interest loan rates charged by your new lender.
Even though some lenders will accept to strengthen your loan repayment terms for a longer period, you may end up paying more in interest in the long run.
4. Hurting credit score: If you miss a payment with the new lender, they will report such late payments to credit bureaus. Since this will hurt your credit score, you may struggle to secure any other form of financing in the future.
Steps of Credit Card Debt Refinancing
1. List down your credit card debts
Critically analyze your existing credit debts. List them down in order of the outstanding balances and applicable interest that accrues.
2. Explore viable borrowing options
Since you are looking for the betterment of your financial status with regard to credit cards, look for options that offer your better (possibly lower) interest rates or even a longer repayment period. Compare terms of potential lenders both at macro and micro levels. At the macro level, you could be evaluating lenders like banks. At the micro level, you could be evaluating lenders like credit unions.
Finding a lender who can refinance your credit card debt has been simplified by PerosonalLoans, BadCreditLoans and CashAdvanace. These three pool reputable lenders who can accept to consolidate your debt if you meet their eligibility score. You only need to submit a debt consolidation application, and a lender accepting to consolidate your loans will offer you. You can accept an offer if multiple lenders accept consolidating your debt. This is a straightforward process made possible in the modern day and age.
3. Submit refinancing applications
Once you have selected the best option to refinance your credit card, file and submit an application. Upon submitting the application form, the lender(s) will review your application and study documents provided and analyze your credit score.
If you apply with multiple lenders, some will accept your application, while others will likely decline. Those who have applied your application will reply with offers to refinance or credit card.
4. Analyze offers
Once you have identified viable options, get a copy of the effective terms and conditions that each lender demands. Try to learn whether these terms and conditions are accepted without modification or if lenders are open to customizing a few areas.
5. Refinance your credit card
There are two ways to refinance your credit card upon your acceptance by a lender. One, the lender could issue you with a new credit card and pay off your existing credit card debt. Secondly, the lender could give your cash to pay off or existing card without necessarily issuing you a new credit card.
6. Repay the credit refinancing loan
With your credit card balance fully paid off, now focus on repaying the new loan. Commit to regular payments without a default as agreed. Pay as agreed with your lender to avoid fines and penalties being affected against you.
7. Track your repayment
Keep a close eye on your progress as you repay the new loan. Let you be guided by discipline, and you will pay off the new loan as soon as you agree with your lender.
- Apply for A Debt Consolidation Loan Up To $35,000
- Business VPN Service Providers
- Best PDF Editor for Small Business
- Importance of Business Plan in Entrepreneurship
- Can You Get a Home Improvement Loan for A Pool?