When it comes to finance, banking can be tricky but also fruitful. Wrong choices may lead to a deadly bankruptcy and the right choices may lead to a big success. It applies in planning to pay off debt in a soon way. Firstly, you need to know your all debt obligations covering credit card balance or loan then consider which one is payable whether the current interest rate or minimum payment. Finally, you will decide credit card refinancing vs debt consolidation. It is a good to start with each definition.
Credit Card Refinancing and Debt Consolidation Definition
Credit card refinancing refers to many to one. It means that combining several loans to become a single loan. People also call this as simplification. This could be done by moving all small or separated loans into a big lending company, so you will only pay one debt to that big company.
Moreover, debt consolidation can be done by finding a total new loan with a better interest rate that you can use to pay to the other loans. By doing this, you can have debts with the better ones. In other words, you pay less the previous loans by consolidation from a debt consolidation.
Before taking one or even both of them, you need to keep in mind that those are to vanish your debt; not to make more debt. Never let yourself to use the available balance because you may get more debt than before. From the definition above, credit card refinancing vs debt consolidation has not showed any specific effect of user. Here are some real advantages and disadvantages from both of them.
The Advantages and Disadvantages
For credit card refinancing, the advantages cover the fast process of application and your balance transfers has zero percent interest rate. Moreover, you can re-access your credit line while the line gets paid down and your high interest rate credit debt is replaced by another with a better interest rate. Sadly, refinancing also has some minuses that are fees for balance transfer and other variable interest rates. The zero percent rates also will come to an end as you might never pay the balance off.
As the title of this article “credit card refinancing vs debt consolidation”, debt consolidation also has advantages and disadvantages compared to the refinancing one. It is beneficial because the consolidation has a fixed interest rate, a definite payoff term, a fixed monthly payment and a lower rate compared to the rate that you may pay on other credit cards. In contrast, the consolidation also causes you to have origination fees and a payment that never drops. It may make you to run up at your credit cards again and again. Therefore, you will get involved in many more application process.
Those are the explanations of credit card refinancing vs debt consolidation. The definition, advantages, and disadvantages are provided above. From there, we can see all the strength and weakness from them both and consider when the right time to use them. Once you understand, see your condition then go make the best choice and seize the loan.