Tips to help refinance credit card debt
According to one report, about 70 percent of credit card users don’t pay off their balance in full each month. If you’re one of them, it’s time to find a strategy, and refinancing could be a good idea. With a refinancing, you could pay off your debt much faster. Here’s everything you need to know.
What is Credit Card Refinancing?
Credit card refinancing is basically a way to lower the interest rate that you’re paying on your credit card debt. The most common ways to refinance include balance transfer cards, personal loans, and home equity loans.
Does Refinancing Hurt Your Credit Score?
Refinancing can lower your credit score in the short term, but in the long run, you’ll benefit from it. When you open a new card, there will be a hard inquiry, and that will ding your score. However, as you pay off the debt your score will rise again.
Ways to Refinance
Use a Card. A balance transfer card is the easiest way to refinance your credit card debt. These cards offer a 0% interest rate for a limited time (usually 12-18 months). During that time, you can make payments on your debt and not have to worry about interest accumulating. These cards do come with a fee for the transfer, so make sure it makes financial sense to sign up. Make a plan to pay off all of your debt within the intro period so you don’t end up with interest payments once again.
Home equity loan. If you’re a homeowner, you might be able to take out a loan or line of credit based on the equity you have on the home. These loans have low interest rates, so you can use them to pay off your high interest debt. This can be risky though, as your home could be taken if you miss payments. Before choosing either option, research both and choose the one that makes the most sense financially.
Written by Chris O’Shea, savvymoney.com.