A sizable portion of the population is amassing extensive debt, credit cards and loans, without a repayment plan in line. This ultimately leaves many unable to keep up with even the minimum amount due when the expenses combined with standard monthly obligations exceed the debtor’s financial capacity. 

Credit cards, in particular, can come with hefty interest rates ranging from roughly 20 percent and above. With most people having more than one card, the interest from carrying a balance from one month to the next for each can be considerable. 

Instead of falling into credit card delinquency, also a relatively high statistic, many debtors reach out to loan providers and credit card issuers for refinancing options. Refinancing gives a client the chance to replace high-interest debt with lower-interest financial solutions that offer more favorable terms.  

What Is Refinancing 

In the world of credit cards, refinancing involves obtaining a single low or no-interest credit card to transfer the existing high-interest debt for greater savings and faster repayment. Please visit besterefinansiering.no/  for guidance on finding the best refinancing solutions.  

Debtors can also obtain a lower-interest fixed-rate loan to consolidate the debt into one installment. The objective with refinancing is to save considerably in interest costs while also avoiding creating additional debt after going through the process. 

Refinancing might not be the ideal financial solution for you, but there are a range of options. Depending on your criteria, you have every opportunity to find one that meets your needs. 

As a rule, anyone with below-average credit will be ineligible for interest-free credit and will also struggle to get a lower-interest card or loan. In this scenario, a non-profit debt consolidation resource would be a favorable solution since they do not rely on credit for qualifying. 

Another factor to consider that will help you decide the right solution when refinancing credit card debt or multiple high-interest debts is the amount you need. Credit cards will be limited compared to loans. Here are the solutions most readily available when refinancing debt. 

Interest-free balance transfer card 

Many credit card brands offer interest-free balance transfer rates to entice new long-term clients. When transferring balances from other debt, it’s essential to be aware there is usually a transfer fee that can range from “1 to 5 percent of the balance due.” 

You’ll need to weigh the expense against the savings to ensure the refinance is worthwhile. The 0 percent APR is an introductory offer that typically lasts for up to 18 months.  

You will need to repay the transferred debt within that time frame because balances carried beyond that promotional period will be subjected to standard credit card rates. These will range from 20 percent and above based on your criteria.  

The goal is to make a concerted effort to repay the entire balance within the designated period to avoid having a similar debt situation as you started with. If you are able to get the debt repaid, avoid creating more debt once the standard rate kicks in. 

If you want to use your new card, create low balances that can be repaid as the invoices arrive. 

The debt consolidation loan 

An unsecured personal loan is usually the product to choose when consolidating multiple high-interest debts into a single loan payment. These fixed-rate loans require no collateral and typically offer lower interest than a credit card, depending on your criteria. 

With this financial solution, the lowest rates are reserved for individuals with good to excellent credit. It only makes sense to take this step if the interest falls below that of the debts you’re repaying. With excellent credit, borrowers could see rates at roughly 12 percent. 

It’s suggested that even if you have average credit, a debt consolidation loan is worth considering since the rates will likely still fall below the average credit card rates. The benefit of a personal loan is that the rate is fixed over the loan’s life, meaning the installments will be stable for the duration. 

Another advantage is you won’t have the limitation that’s imposed with interest-free credit cards. Terms for personal loans can run up to 7 years. 

The non-profit debt consolidation 

A non-profit debt consolidation resource doesn’t consider credit criteria when providing financial solutions. These services are comparable to personal loans and aim to consolidate multiple debts into a single debt. 

The agency serves as an intermediary between you and the creditors in the consolidation process.  

These agencies have connections with the various credit card companies that allow negotiations to cut debtors’ interest rates from those the client can no longer pay to a more reasonable rate, sometimes as low as the single digits.  

With the much more affordable rates, the monthly payment is more manageable. The single monthly payment that you make on these debts that have been reduced will be to the non-profit agency. The facility will then issue payments to each of the credit carriers based on the negotiated amount. 

The non-profit financial solution is a clear-cut solution for individuals with below-average credit who have few other options. When the process is complete, you will no longer have the high-interest debt and will need to make an effort to avoid creating debt. 

The home equity loan

When you have a dire financial situation with high-interest debt that’s interfering with your standard monthly obligations, another solution some consider at this point is a home equity loan to refinance the balances.  

Before this can even be considered, you must ensure you have equity in your home available to borrow from. Equity is the difference between the balance on the house loan and the house’s market value. 

This difference is available to borrow. Homeowners are only allowed to borrow roughly 80 percent of the equity in their home.

Home equity loans have fixed rates that are usually lower than both an unsecured personal loan and a new credit card. The downside for some homeowners will be the fact that the house will serve as collateral with the consolidation. This means if there’s a default, the lender can seize the property to recover their balance. 

In another vein, you will essentially have a second mortgage on your home, which means the number of years for debt repayment on your home will be extended.  

How Does Refinancing Credit Cards Impact Your Credit 

The damage to credit from refinancing debt multiple or high-interest debt can be reduced with adequate planning. Applying for a new credit card or loan equates to one hard inquiry. These do lower the credit score slightly, but it bumps back up relatively quickly. 

The biggest impact on credit is when many hard inquiries are made within a short period of time. If you were to formally apply for several balance transfer cards simultaneously, this could lower your score before any of the companies have the chance to issue approval.  

When creditors or lenders see the multitude of activities on your profile, it can lead to higher rates or the possibility of rejection. It’s an automatic red flag for providers whose priority is ensuring that you can repay debt without any hassles. 

The objective is to research the different refinancing solutions before applying for any. Preapproval or prequalifying allows you to see what you’re eligible for with only a soft credit pull. From that point, you can then make more informed decisions. 

When choosing a new credit card, your average account age will go down. Account age comprises roughly 10 percent of the credit score. You can maintain this average by ensuring old credit cards are active even if you only make a small purchase every six months and pay it off. 

Final Thought 

Refinancing debt is almost always the best solution to struggling with monthly obligations you can no longer manage. How you resolve the issue will depend on your criteria. Most credit card issuers and loan providers will base their interest and approval on credit scores. 

That doesn’t mean a debtor with below average credit is out of luck. There are solutions for every credit and financial circumstance. The objective is to ensure you will not pay more in interest than what you’re paying with your existing debt. 

After refinancing, the priority is to avoid recreating debt using the credit cards that have been repaid. You want to avoid getting back into the situation from which you came.