Credit card refinancing vs. debt consolidation: What’s the difference?

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Credit credit card debt is a concern to millions of Americans (about 189 million to be precise). For many, it’s difficult to pay off consolidationnow.com packages.

Averaging $8,398 in debts for a household of three, credit card debt can be a major problem. Paying minimum amounts can help keep you in the game however, as the amount of interest added up, the task of tackling problem — as well as ultimately getting out of it becomes more challenging than ever before.

Credit card refinancing vs. debt consolidation

If you’re facing a lot of credit card debt There are two approaches to help: credit card refinancing and debt consolidation.

Refinancing a credit card

“‘Credit refinancing of a card is a fancy method to say ‘balance transfer offer”” stated Howard Dvorkin, a certified public accountant and chairman of Debt.com.

Simply put, it’s the time to use an entirely new credit card that comes with the lowest or no percent interest for up to 18 months for the purpose of paying off remaining balances of your other credit cards. This will allow you to lower your financial burden without accruing additional interest. If you’re looking for the lowest interest rate credit card, visit Credible to look at different credit options and discover what they can offer you.

Based on llian Georgiev the co-founder and CEO of the personal financial app Charlie the benefits of this initiative could be enormous.

“All the money you pay each month goes straight to principal rather than being split into the debt you owe and the interest,” Georgiev said. “It’s the ultimate solution for repaying debt.”

Credible can assist you in finding the perfect credit card for your needs. Pick zero-percent credit cards and receive an overview of the annual fees and the welcome offer, credit needed, and many more.

Financing the balance on your credit account isn’t the best option, however — and certainly comes with certain risks and drawbacks, according to experts. One of them is that there are typically transfer fees to be paid.

“You have to do the math to determine if get a better price but it’s also simple to get it wrong,” Georgiev said. “The lender is gambling you’ll do it, which is the reason they’re offering the bargain.”

There could also be significant late charges if you don’t manage to pay your bill in time, or should you not pay off the balance or transfer it prior to when the promotional rate ends and you end up paying a much greater interest rate than what you are currently.

Consolidation of debt

Debt consolidation is an alternative option. It uses personal loans to consolidate all your debts – credit card and student loans, car loans etc. all into a balance.

“Consolidation loans can help take the burden of credit card debt, medical bills that are not paid collection accounts, as well as payday loans,” Dvorkin explained. “A consolidation loan could help reduce monthly debt payment, lower the interest rate, and assist them in getting out of debt more quickly.”

If you’re a victim of a lot of high-interest debt Consolidating them will usually mean a lower interest and less interest paid over the course of time. It’s also easier to make the payments for.

If you believe such a loan could be the best option for you, you can visit an online marketplace such as Credible to learn more of the options for debt consolidation loans.

“You can replace a variety of loans, and many terms, with a single loan that you are able to wrap your brain over,” Georgiev said. “It’s easy to predict as well. Just like auto loans the monthly installment is set and has an established end date. It makes it simpler manage your finances.”

It’s true that this method isn’t ideal. Consolidation loans are accompanied by setup fees as well as transfer fees, annual charges, and much more There’s also not much flexibility. “You have to make an unassailable payment for a lengthy period of time,” Georgiev said.

Do I need to refinance a credit card, or do I consolidate my debt?

Refinancing your credit card is the best option for you if only have just a few thousand dollars in your credit cards or if the cards have very low rates. It is also important to make certain you’re in control about your spending habits since 0% promotional offers are a tempting proposition.

Make use of Credible to decide whether a balance transfer or credit card with a 0 percent credit card is more appropriate in your financial situation. Credible makes it easy to evaluate choices.

“You should also be careful about getting into additional credit,” Georgiev said. “Yes you’re older credit card is currently at zero, which means it might seem like you have plenty of room to breathe however you’re not. The aim is to reduce your debt, with a lower rate, not more with a wider range of cards.”

To be eligible for the cards, you’ll generally need to have a at least 700 credit score or more. It is also important to do the math and make certain that your savings will be greater than any transfer charges that the card will charge.

Consolidating debts is beneficial if you’re dealing with many debts, and one with a large amount. It is important to ensure you’re earning a steady salary for these, since they require regular, monthly installments for several years in the future.

Make sure you use an online personal loan calculator to figure out what your monthly payments will look like. And should you not be sure that you’ll be able to cover it consistently avoid. You can also utilize Credible’s online tools for free to find out what personal loan rates you are eligible for. Enter your desired loan amount as well as other basic information to review the options available.

“Consolidation loans do not freeze credit accounts, which means people with problems could quickly fall back into the debt cycle,” Dvorkin said. “Consumers looking to utilize this tool to reduce debt should be aware of the costs associated with the consolidation loan. If they are unable to manage the monthly payments for their loan or the costs to set up their loan, or costs of interest, a consolidation loan isn’t for them.”

Bottom line

Both credit refinancing of credit cards and debt consolidation are both beneficial options for those struggling in credit debit card debt. To decide which is the best option for you, be sure you go to an online marketplace such as Credible to find out what you can get at 0 percent credit card options you could be qualified for. Personal debt consolidation rates loans are also readily available.

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