What To Know About Credit Card Refinancing
When people explain building credit to children, they usually describe it as borrowing money and paying it back little by little. There is a lot more to loans than that, though. First, most loans accrue compound interest, and this means that, by the time you have repaid the loan in full, the amount you have repaid is much greater than the amount you originally borrowed. This is simply enough when the amount borrowed is relatively small, and the repayment term is less than two years. When the loan amount is large enough and the repayment term is long enough, though, debt can take on a life of its own. Consider that some college graduates, as well as some former students who left their programs of study without a diploma, have more student loan debt than they can reasonably hope to pay in a lifetime. Their goal is to make minimum payments on their debt until the lenders forgive the remaining balance, or else for the rest of their lives. That is only the most extreme example, though. Plenty of other large debts change shape over time. Think about how many people borrow a 30-year mortgage when they buy a house, but then they refinance the mortgage one or more times. Did you know that it is also possible to refinance credit card debt? For help thinking outside the box about repaying your credit card debt, contact a Boca Raton debt lawyer.
Credit Card Refinancing Is Almost the Same as Debt Consolidation, but Not Quite
Refinancing is when you borrow a new loan and immediately use the money to pay off an old loan. In other words, refinancing means re-borrowing. The incentive for doing it is usually that the new loan has a lower interest rate. It is a common practice to refinance home mortgages when loans with lower interest rates become available. This way, you pay less interest over time. Credit card refinancing is when you borrow a personal loan and use the money to pay off a credit card.
Isn’t that the same thing as debt consolidation? Not exactly. Debt consolidation is when you borrow a large personal loan, the biggest the bank will lend you, and use it to pay off several credit cards and make a dent in your car loan or home mortgage, to knock out as much debt as possible with one loan. Paying your entire personal loan toward one credit card is more like refinancing a mortgage than it is like debt consolidation.
Alternatives to Credit Card Refinancing
It is not always easy to qualify for personal loans, especially when you owe a large balance on a credit card. A more feasible option might be an interest-free balance transfer or to settle your debt with the credit card company for an amount less than the face value of the balance.
Work With a Debt Lawyer About Tackling Your Credit Card Debt
A South Florida debt lawyer can help you refinance your credit card debt. Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.
Source:
credible.com/personal-loan/credit-card-consolidation-loans/credit-card-refinancing-vs-debt-consolidation
