Trying to repay your credit card debt can be stressful – especially if you owe money on several cards with high interest rates.
Refinancing can be an effective way to manage your credit card debt, helping you repay your loan faster and save you money. However, unless you know which refinancing option is right for you, then you could end up paying more than you already do now.
Read on to find out how to refinance your credit card debt. We’ll also discuss the benefits of refinancing and how a debt solutions provider can help.
Key Takeaways
- Refinancing your credit card debt(s) is the act of consolidating multiple credit card debts into one.
- The main benefits of consolidating your credit card debt is that it can help you save money, simplify your repayments, and reduce stress.
- A tailor-made debt relief plan can help you plan a budget and work toward financial freedom.
What is Refinancing Your Credit Card Debt?
On the surface, refinancing your credit card debt is pretty simple: you consolidate multiple credit card debts into one.
That means, instead of repaying multiple debts – each with their own amounts, due dates, and interest rates – you only have one to repay. This can help simplify your debt repayments. You might even reduce your monthly instalments and the amount of interest that you pay.
However, there are many ways to refinance your credit card debt. The two most popular options are to get a balance transfer credit card or apply for a personal loan. As you’ll soon learn, there are pros and cons to each method. For this reason, consult a debt relief expert who can help you make the best choice.
What Are the Benefits of Refinancing Credit Card Debt?
There are many benefits to refinancing your credit card debt, as it can help you:
- Save money: If the new loan terms have a lower interest rate than what you are paying now, then this can help you save money.
- Simplify debt repayments: By having only one debt to repay, you will have an easier time making your repayments on time.
- Reduce your monthly instalments: If you choose to extend the loan repayment period, then this can help lower your monthly instalments, meaning more money in your pocket.
How Does Refinancing Credit Card Debt Work?
As we mentioned before, credit card debt consolidation comes in many forms. The two most popular options are to perform a credit card balance transfer or take out a personal loan. Here is a step-by-step breakdown of how each method works.
Credit Card Balance Transfer
A credit card balance transfer can be an effective way to reduce your credit card debt. It involves moving the balance (the money that you owe) from one credit card to another.
Many lenders offer balance transfer credit cards. These cards have a low or zero interest introductory period, which can last anywhere from 12 to 24 months or longer. The idea behind this is to pay off the new card before the introductory period is over. By doing so, you save money by paying less interest.
Keep in mind, though. You can only transfer your credit card balance to a new card from another lender. Here are the steps involved in performing a credit card balance transfer:
- Step 1: Shop around to compare offers from different lenders. Be aware of their introductory terms, including their interest rates, maximum loan amounts, and the length of the introductory period. Watch out for early repayment fees, too.
- Step 2: Be sure to check your credit score. To do this, request a credit report from any of the three credit bureaus in Australia, including Equifax, Experian, or Illion. A credit score of 0 to 459 is generally considered to be below average.
- Step 3: Once you’ve identified your preferred lender, apply for a balance transfer credit card. Depending on the credit card lender, you may be able to apply online or over the phone. Your lender will then determine if you qualify for a balance transfer credit card. If so, they will approve your application and help you get set up.
- Step 4: Once you’ve received your balance transfer credit card, start making regular repayments on the card. Making timely, regular repayments on your balance transfer credit card will, over time, raise your credit score. Keep going until you fully pay off the card before the introductory period is over.
Personal Loan
This works just like a regular personal loan. You take out a loan through your preferred lender, using the loan funds to pay off your existing credit card debt(s). You then proceed to pay off the new personal loan until your debt is cleared.
Since most personal loans have a fixed interest rate, you can expect to repay the same amount each month. Most personal loans are also unsecured, so there is no collateral tied to the loan.
Here is how to get a personal loan to pay off your credit card debt(s):
- Step 1: Take the time to compare personal loan options from different lenders. Take note of their interest rates, loan amounts, repayment terms, and fees. Determine whether each loan is secured or unsecured, of which the latter is more common for debt consolidation.
- Step 2: The same as before, check your credit score. Request a free credit report from any of the three credit bureaus in Australia. The higher your credit score is, the better your loan repayment terms will be, meaning lower interest rates.
- Step 3: If you’re concerned about your credit score, talk to a debt relief expert. You may be eligible to apply for a personal loan with bad credit.
- Step 4: Apply for a personal loan through your chosen lender. Your lender will evaluate your eligibility for a personal loan. Be ready to provide basic personal and financial information, including your name, date of birth, occupation, and pay slips.
- Step 5: Once you’ve been approved for a personal loan, use the loan funds to pay off your existing credit card debt. Then, proceed to pay off the new loan. Continue to make regular, timely loan repayments.
When to Seek Debt Relief Help
Juggling multiple credit card debts can be stressful. But there are people you can turn to for help. At Debt Fix, we have years of experience helping people like you escape credit card debt.
Our friendly, knowledgeable team is highly skilled in all aspects of debt consolidation. We take the time to listen to your concerns and understand your financial circumstances. We then propose a tailor-made debt relief solution that meets your needs.
If you’re struggling to repay multiple credit card debts, talk to us. We can help you determine which form of debt relief is right for you. Whether it be a credit card balance transfer or a personal loan, we can advise you on the pros and potential drawbacks of each method. This way, you will know which form of debt relief will help you save the most money.
Contact Debt Fix Today
To find out how we can help you today, get started by filling out our online form. You just need to answer a few basic questions. It will only take a short moment of your time. Plus, your answers are 100% confidential and consulting us will not affect your credit score.
Frequently Asked Questions (FAQs)
Refinancing your credit card debt can be overwhelming. Here are answers to common questions about this topic.
Is Consolidating Credit Card Debt a Good Idea?
If you are struggling to repay multiple credit card debts, then debt consolidation may be right for you. By talking to a member of the Debt Fix team, we can help you find a solution that helps you save money and avoid stress.
What is the Best Way to Consolidate Credit Card Debt?
That depends on your circumstances. It usually comes down to which option will help you save the most money. That means choosing a refinancing option with the lowest possible interest rate. Other factors like loan amounts and early repayment fees will also come into play.
Will Consolidating Your Credit Card Debt Affect Your Credit Score?
After consolidating your credit card debt, your credit score may go down for while, but this is normal. Through regular repayments, your credit score will start to improve over time.
