What is Credit Card Refinancing Vs Debt Consolidation?

Both the terms are very different from each other and you must understand the difference between the two otherwise you might get in trouble.

What Is Credit Card Refinancing?


If you have a ton of debt on your credit card and due to late payments or only making minimum payments, the interest rate has shut up to the sky, you can do credit card refinancing to reduce the interest rate or shut it off altogether for a limited time.

Even though it is not available all the time, and you might use it when you need it, if your credit card provider gives you this opportunity, it is good to know what it is.

You need to apply for a credit card without an interest rate balance transfer option that has enough credit limits to transfer your debt.

Once you transfer your debt to the new credit card, you can make use of this zero-interest-rate card for a limited amount of time, generally around 16 to 18 months.

After that, you get your previous interest rate.

What Is Debt Consolidation?

Debt consolidation is the process of taking out a newer, bigger loan with better pay-out terms like lower interest rates or extended payment period times to pay your other high-interest terms or combining all of your loans altogether under one umbrella with favorable options to pay it off.

Read: 10 Best Debt Relief Companies For Debt Consolidation

It is not for everyone, as taking out a loan might require collateral, and if you don’t have the equity to do so, it might be hard for you to do it.

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What Is The Difference?

The main difference between credit card refinancing and debt consolidation is that in one of them, you use a favorable option that is only for a limited amount of time, a maximum of 18 months, and it is not available all the time.

Your credit card provider needs to have this option. Debt consolidation is taking out another loan, probably a bigger one, or combining all of your loans together to create a better-paying scheme until you pay off all your debt.

Which One Should You Go For?

The decision to go for either one of these options depends solely on your needs and how big your debt is.

If you have both of these options available from your provider, going for debt consolidation might be a more concrete choice because refinancing is only for a limited amount of time, and then you start having the same amount of interest as you did before.

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The Verdict

To conclude, credit card refinancing and debt consolidation are actually similar stuff that aims to make your loan payments easier, but one of them is only for a limited amount of time and is not available all the time with every provider; the other one is easier to do and has no time limit.

Once you go through the process of consolidation of your debt, it will be like that until you pay all of it off.

But, it is worth noting that taking out another loan with better payment options is hard, and you might need some equity to get this loan.

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