Are you juggling one or more credit card debts and struggling to repay what you owe? If so, then credit card refinancing could be for you. When done correctly, refinancing can potentially lower the amount of interest and fees you pay, extend the lifespan of the debt, and help you repay your debts faster.
But what exactly is credit card refinancing? How does the process work? And what outcomes can it achieve for you? Read on to learn how to refinance credit card debt – and much more.
Key takeaways
- Refinancing your credit card debts can be an effective way to achieve more favourable repayment terms, including reduced interest rates.
- The most common ways to refinance credit card debt are to either perform a balance transfer or secure a debt consolidation loan.
- When searching for credit card refinancing options, ensure the new interest rate is lower than your current rate.
What is Credit Card Debt Refinancing?
Credit card debt refinancing is the process of transferring the balance of your credit card debt from one lender to another. The main goal of refinancing is to secure more favourable repayment terms, including lower interest rates and associated fees.
But how to refinance credit card debt? The two most common ways are to do a balance transfer or request a credit card debt consolidation loan. Regardless of the chosen method, the ideal outcome is to reduce your debt repayment amounts and convert multiple debts into one simple, easy-to-manage monthly instalment plan.
The proper refinancing option for you will depend on your unique circumstances. Talking to a debt consolidation expert can help give you the insight and support you need to make an informed choice. They can review your current finances, advise you on the pros and cons of each refinancing plan, and show you how to refinance credit card debt in a way that works for you.
Types of Credit Card Refinancing
As we mentioned before, the two most common ways to refinance a credit card debt is through either a balance transfer or debt consolidation plan. There are pros and cons to each option, which we will cover in detail so that you can decide which option is right for you.
Credit Card Balance Transfer
A credit card balance transfer is where you transfer the balance of your credit card debt from one lender to another. It can also mean transferring the balance of your credit card debt to a new plan under the same lender. Most new credit card plans offer a low or zero interest introductory period, enabling you to pay off your existing credit card debt at a lower interest than your previous plan.
Let’s say you are currently paying 25% interest on your credit card. You could transfer the balance to a new plan with zero interest on an introductory 28-month period. If you successfully pay off your credit card debt, before the introductory period ends, then you could save on high interest payments.
Pros of credit card balance transfer
- Pay little to no interest on your credit card debt repayments
- Typically low balance transfer fees
- May extend the lifespan of your existing debt repayment period
Cons of credit card balance transfer
- Could end up paying more interest after the introductory period
- Balance transfer fees can vary between lenders
- Failure to repay on time could impact credit score
Credit Card Debt Consolidation
Credit card debt consolidation works a bit differently to a credit card balance transfer. However, the achievable outcomes are similar: reduce (or remove) the amount of interest and associated fees, extend the lifespan of the debt, and simplify the payments into one monthly instalment. If you are wondering how to refinance credit card simply and easily, debt consolidation is a great choice.
With a credit card debt consolidation plan, you are approved by a lender to take out a loan. You then use the funds of that loan to pay off your credit card debts. From there, you proceed to repay the lender, typically through bite-sized monthly instalments. The amounts can be automatically debited from your nominated bank account.
You can also use debt consolidation to consolidate both your credit card and personal debts into one. This way, you only have one lump sum payment to manage per month, as opposed to multiple repayments with different due dates, values, and providers. In terms of how to refinance credit card debt, debt consolidation is an excellent choice.
Pros of credit card debt consolidation
- Consolidate multiple debts into one easy-to-manage monthly instalment
- Potentially reduce the amount of associated interest and fees
- Increase your credit score with regular, timely debt repayments
Cons of credit card debt consolidation
- May be charged with account setup and closing fees
- Doesn’t solve the underlying reason for the debt
- Could damage your credit score if you don’t meet your repayment obligations
Is Credit Card Debt Refinancing Right for You?
Whether or not credit card debt refinancing is right for you depends on your circumstances.
A debt consolidation expert can review your current financial situation. They can then help you decide which debt relief plan is right for you. You may even wish to pursue an informal debt agreement, enabling you to restructure your existing agreement to better suit your needs.
You may ultimately decide to work on improving your credit score before you pursue debt relief. This may enable you to restructure your existing loan at a reduced interest rate, increasing the odds of a timely and successful debt repayment plan. Either way, doing your research first – before you sign the dotted line – is essential to weighing up your options and making an informed decision.
That said, if you do wish to pursue debt relief today, there are a few ways to determine which route is right for you.
Choose a Credit Card Balance Transfer If You…
- Are confident you can pay off your debts within the low (or zero interest) introductory period
- Want to enjoy additional perks, such as rewards programs for shopping at specific places
- Have only one or two credit card debts that are of relatively low value.
Choose Credit Card Debt Consolidation If You…
- Are struggling to manage multiple credit card debts of high value
- Want to simplify your debt repayment schedule
- Want to reduce the amount of interest you currently pay
Talk to Debt Fix Today for Expert Advice
Juggling one or more credit card debts can be frightening – and not knowing how to refinance credit card debt can be confronting, too. If you are feeling the pressure of the vicious debt cycle, then talk to Debt Fix today. Our highly skilled debt consolidation experts will be happy to review your situation, advise you on different debt relief options, and set you up with a plan that works for you.
Additionally, our team may be able to reduce the amount of interest and fees you owe, saving you not only stress and headache but also money too. This way, you can focus on working towards financial security for the long term.
To request a free, private consultation with a debt consolidation expert, get started today. It only takes 30 seconds to fill out the online form, and making an application will not affect your credit score.
Frequently Asked Questions
How to Refinance Credit Card Debt at the Right Time?
You should consider refinancing your credit card when the interest rate is low, as you may be able to secure a fixed interest rate, one that is lower than your existing rate. That said, you should always anticipate the interest rate to rise, so you are not paying more than what you did before.
Are There Hidden Fees Associated With Credit Card Refinancing?
Whether you agree to a credit card balance transfer or debt consolidation, both refinancing options may incur additional fees. These include fees for account set up, ongoing account management, and closing the account. Be sure to read the fine print and get up to speed with the specifics of your new agreement.
Do I Have to Refinance With the Same Lender?
You typically don’t have to stay with the same lender you are currently with. You should have the freedom to shop around, compare lenders, and choose the one best for you. That said, you may be able to negotiate with your existing lender, explaining that you are shopping around for a better deal. They may be able to work with you, offering exclusive benefits (possibly even lower interest rates), to keep you on board as a loyal customer.