Refinancing Options To Reduce Credit Card Debt
If you are looking out for ways on how to , you may consider using some refinancing methods. Refinancing is a process that allows you to cover your existing loan with a new loan that comes with more favorable terms. For example, if you owe a certain amount of money on several credit cards, you can take a single big loan at comparatively much lower rate and pay off the balances on all your credit cards. Following are the two most common refinancing methods that you may like to try.
The Balance Transfer Method
This method requires you to transfer balances from all other credit cards to a single card, the one that charges the lowest rate of interest but offers a much higher limit. If you follow the right approach, this method can efficiently help you reduce credit card debt. Contact different companies and tell them that you want to transfer all debt balances from different cards to a single card provided you are offered a low APR and a much higher limit. Once a company offers you a favorable deal, send the copy of that deal to other companies and ask them of they have a better offer for you. If you negotiate like this, you can easily succeed in refinancing your debt using this balance transfer method. Once the balance is transferred, cancel or lock up all other cards. If you are serious about achieving a debt-free life, you must try to pay more than just the minimum payment. A good idea is to pay at least 5%-6% of the total balance every month.
Getting A Home Equity Loan
Another great way to refinance and reduce credit card debt is by obtaining a home equity loan. Obviously, this method is applicable to only those people who are lucky enough not only to own a home but also to have equity on it. However, there are a couple of things that you need to keep in mind while you use this method. For example, make sure that the refinancing program you have chosen to go for does not charge you any penalty for early repayment. Besides that, you must borrow only as much amount as is needed to pay off your existing . Borrowing more than that will only result in a much heavier debt burden which will just grow bigger and bigger with time. So, even if you have a very high amount of equity in your home, you should avoid the temptation to borrow more than you actually need. Most importantly, do not keep using your credit cards while you are paying off the existing balances.
Overall, refinancing can be a great way to reduce credit card debt, but only if you show some great financial discipline.