Credit Card Refinancing vs. Debt Consolidation

Written by Banks Editorial Team
4 min. read
Written by Banks Editorial Team
4 min. read

Credit card debt is relatively easy to get into – paying it off is another story. So, if you’re buried in credit card debt, chances are you’re overwhelmed by the minimum payments and desperately seek relief. 

Credit card refinancing and debt consolidation are common solutions consumers use to get rid of those pesky balances. But which is best? Read on to learn more about how they work, the benefits and drawbacks of each, and where to find help if you’re struggling to stay afloat financially due to credit card debt. 

Consult With Professional Credit Card Debt Relief Advisors

Get a free phone consultation with a debt relief expert to review your debt relief options and find the best solution for getting out of debt today!

Credit Card Refinancing vs. Debt Consolidation: Key Differences

Both have the same objective – to help consumers get out of credit card debt faster and save on interest. However, the critical difference between the two is how it’s done. 

Credit card refinancing is done with a balance transfer card. Debt consolidation usually involves taking out a loan to pay off your high-interest credit cards. 

What is Credit Card Refinancing?

If you have good or excellent credit, you can temporarily secure a lower interest rate by applying for a balance transfer credit card. Here’s how it works: 

  • Open a balance transfer card that offers a zero-interest promotional period. 
  • Transfer the balances from your high-interest credit cards to the new card. 
  • Pay off the balance on the new card within the promotional period (generally between 12 and 18 months). Also, refrain from using the card you pay off. 

Pros of Credit Card Refinancing

  • You could save hundreds or thousands of dollars in interest. 
  • You can get out of credit card debt faster if the limit on the new card is large enough to cover all your high-interest credit card debt. 
  • Balance transfer credit cards are typically approved in minutes.

Cons of Credit Card Refinancing

  • You’ll likely pay a balance transfer fee between three and five percent. 
  • You could end up with even more debt if you pay off your high-interest credit cards and use them again. 
  • You must have the means to pay off the balance on the new card within the promotional period for this strategy to be effective. 
  • You could get denied a balance transfer credit card with less than perfect credit. 
  • You could lose the promotional interest rate and get a steep penalty APR if you miss a payment.

When to Refinance Credit Card Debt

It may be ideal to refinance your credit card debt if you can afford to pay the total outstanding balance on the new credit card within the promotional period. But make sure you can qualify for a balance transfer card with a limit that’s large enough to cover all the outstanding balances on your high-interest credit cards. 

You’ll need to devise a plan of action to ensure you can pull it off, or you risk paying interest if the interest-free period ends and you still have a balance. 

Consult With Professional Credit Card Debt Relief Advisors

Get a free phone consultation with a debt relief expert to review your debt relief options and find the best solution for getting out of debt today!

What is Debt Consolidation?

Debt consolidation entails securing a low-interest personal or home equity loan to eliminate your credit card debt. Most lenders require a steady, verifiable source of income and good or excellent credit. 

Home equity loans are secured by your property. The amount you’re eligible to borrow will depend on the current market value of your home and how much you currently owe. By contrast, personal loans are unsecured, but you can expect a higher interest rate as they’re riskier to lenders. 

Pros of Debt Consolidation

  • If you apply for a personal loan with an online lender, you could receive a response in minutes. 
  • You’ll make a single payment to the lender instead of several monthly payments to credit card issuers. 
  • You could save a bundle in interest with a personal loan and pay off the balances faster.

Cons of Debt Consolidation

  • You could pay hefty fees for home equity and personal loans. 
  • You could get a higher interest rate on a loan if you don’t have good or excellent credit. 
  • It could take some time to receive a response from the lender regarding a home equity loan application. 
  • You could lose your home if you default on a home equity loan. 
  • You could struggle to afford the payments on a personal loan as the repayment period is usually three to five years.

When to Take a Debt Consolidation Loan

Can’t afford to repay your credit card debt in a short period, even if it’s moved to a balance transfer card? Or maybe you have good or excellent credit and can afford the loan payments? Either way, a debt consolidation loan could be a good fit. A personal loan will get you out of debt sooner as the repayment period is shorter, but you’ll also pay more each month.

On the other hand, a home equity loan gives you a better rate and extended loan term. Still, the downside is you’ll pay more in interest as the lender has several years to collect from you. 

Where to Get Credit Card Relief

Maybe you’ve already researched both credit card refinancing and debt consolidation options but haven’t had much luck. In that case, you’ll need to consider a more aggressive form of relief, like debt settlement, to eliminate your credit card debt for good.

Before you sign up for the first program that appears on Google, check out what Accredited Debt Relief has to offer. It’s a Better Business Bureau (BBB) accredited firm that’s helped over 140,000 clients resolve more than $500 million in unsecured debt. 

You, too, can be their next success story by enrolling in the Accredited Debt Relief debt settlement program that allows you to consolidate your credit card balances without taking out a loan. Below is an overview of what to expect: 

  • Step 1: Request a complimentary, no-obligation phone consultation with a Certified Debt Specialist. They will review your financial situation during the call and work with you to come with a monthly deposit amount.
  • Step 2: Deposit the agreed-upon amount into a Dedicated Account each month. These funds will be used to cover settlement offers Accredited Debt Relief negotiates on your behalf. (Note: Enrollees typically stop paying creditors and make deposits, instead, to facilitate the negotiation and settlement process).
  • Step 3: Once the Dedicated Account reaches a certain balance, the Debt Resolution Negotiators will begin contacting your creditors to work out settlement offers.
  • Step 4: Each time your creditors agree to a settlement offer, it’s presented to you for approval.
  • Step 5: Funds from the Dedicated Account are sent to the creditor to resolve the debt.
  • Step 6: Accredited Debt Relief collects a settlement fee between 15 and 25 percent of the settlement amount. (Note: The fee is also deducted from the Dedicated Account).
  • Step 7: Continue to make monthly payments to the Dedicated Account until all unsecured debts enrolled in the account go through the negotiation process. 

Get started today by submitting an online inquiry. There’s no minimum income requirement, and the free consultation won’t impact your credit score. 

Accredited Debt Relief

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