/images/2018/01/23/navina-side-hustle-mid_MPfEDfV.jpg)
/images/2019/12/06/smart_strategies_to_save_money_on_car_insurance.jpg)
/images/2019/04/12/Woman-refinancing-her-debts-for-credit-card_BRdnq63.jpg)
/authors/sarah_li_cain_updated.png)
/authors/kate-underwood-headshot.jpg)
/authors/yahia-barakah-financebuzz.jpg)
While credit cards have many benefits, credit card debt is not one of them. U.S. households have a total of $1.14 trillion in credit card debt, and it can feel suffocating if your income doesn't keep up with those payments and your other bills.
One strategy for reducing your interest payments is credit card debt refinancing. I've been through mortgage refinancing to get a lower interest rate on housing debt, but credit card refinancing can be an even simpler process.
Your goal with refinancing is a lower APR, which saves you money and can help you pay off debt faster. Let's dive into the different ways to refinance your credit card debt and how they can help you.
When is credit card debt refinancing a good idea?
You may be a good candidate for refinancing if:
- Your credit card is charging you a high APR, and you may get a lower APR or interest rate by refinancing your credit card debt
- Your credit score is good enough to qualify for a lower APR on another credit card or a lower interest rate on a loan
- Your credit score may benefit from lower credit utilization by increasing your total available credit when you open a new credit card
When is credit card debt refinancing a bad idea?
You may want to avoid refinancing if:
- You don't remember to pay your bills on time, so opening another credit card may add to the problem rather than help
- You can't qualify for a 0% intro APR or low APR credit card, or a low-interest loan
- Balance transfer fees eliminate or minimize the benefits of refinancing
- You won't be able to pay off the card by the time the introductory 0% APR ends
How to refinance credit card debt
As for how to refinance credit card debt, there are several different ways to do it:
- Use a balance transfer credit card
- Consider a personal loan
- Use your home equity
- Borrow money from your 401(k)
- Consider a debt management plan
When evaluating your options, think about your credit history, cash availability, income level, and debt size. You can also consider whether you want to lower monthly payments or pay off debt quickly.
1. Use a balance transfer credit card
- No need to pay interest if you qualify for 0% intro APR
- Many balance transfer credit cards offer lengthy intro APR periods
- Transfer amounts can't be higher than the available credit limit
- Typically you'll pay a balance transfer fee
- You may not qualify if you have a low credit score
Consider a balance transfer to a lower APR credit card to save on interest. Ideally, select a card offering an introductory 0% APR for over a year.
But keep in mind that you might need to make a balance transfer within a certain period after account opening to qualify for the intro rate or get a lower fee. For example, the Chase Slate Edge℠ card's balance transfer fee is $5 or 3% of the amount of each transfer, whichever is greater in the first 60 days, then $5 or 5%.
If you don't qualify for a 0% intro APR card, you can still refinance by finding a lower APR card. Even a slightly lower APR can result in significant savings over time.
Keep in mind
Most card issuers charge a balance transfer fee, which is usually around 3% to 5%. Some cards also charge an annual fee, so you'll want to figure out if it's worth it to fork over the cash before you apply for the card and pay the transfer fee.I like a balance transfer because it's a relatively simple way to manage your debt. This method is best for those with small debt amounts that can be paid off within a year or so. Transfer limits typically match your new card's credit limit, so if you can't transfer all your debt, focus on the debt with the highest interest rate.
2. Consider a personal loan
- You'll have a longer time to pay off debt
- Rates may be lower than a credit card
- Some lenders may charge origination fees
- The lowest rates are reserved for those with excellent credit
A low-interest personal loan can be a viable option for credit card refinancing or debt consolidation. Debt consolidation loans often offer lower interest rates than credit cards, but may require good credit for loan approval and excellent credit to qualify for the best rates.
Getting a credit card consolidation loan can help manage payments. I especially like this option for paying down a significant amount of debt. It allows you to borrow from a few thousand to tens of thousands of dollars, transferring your high-interest credit card debts to your loan.
However, if you plan to pay off your debt in less than five years, consider using a balance transfer credit card with an APR introductory period. This could be more cost-effective as new loans may have origination fees on top of other charges, such as interest, late payment fees, and prepayment penalties, depending on the loan terms.
Explore your loan options in our list of the best personal loans.
/images/2020/06/01/loansunder36-logo.png){kind=logo}
3. Use your home equity
- Rates are typically lower than credit cards
- Can borrow large sums of money
- You could lose your home if you fail to make payments
- The best rates go to those with the high credit scores
If you own a home, you can tap into your house's value and take out a home equity loan or home equity line of credit:
- Home equity line of credit (HELOC): If you're getting a HELOC, it works a lot like a credit card. You can borrow up to a certain limit, and during the draw period, you only pay interest on the amount you borrow. Once the draw period ends, you'll need to repay the entire loan amount, including the principal.
- Home equity loan: A home equity loan gives you a lump sum with a fixed interest rate, and you pay it back in an agreed amount of time.
Both home equity loans and HELOCs could be used to help you pay off credit card debt at a potentially lower rate.
Warning
You risk losing your home if you can't keep up with payments.A home equity loan or HELOC is a good option if you have a lot of credit card debt to refinance and want to pay it off over a long period of time, typically 10 or more years. As these loans are secured loans, the money amount you can borrow depends on your home equity.
Shop around at credit unions or online lenders to find the best rates. Keep in mind that (as usual) the lowest rates of interest tend to go to people with the highest credit scores.
4. Borrow money from your 401(k)
- No soft or hard credit pulls to secure the loan
- Rates may be lower than credit cards
- The interest you pay goes back to you
- May impact your retirement
- Potential tax implications
- Need to pay back the loan in five years
If you have bad credit and can't qualify for other options, you might consider a 401(k) loan. This doesn't require established creditworthiness and may offer lower rates than credit cards. The loan repayments and interest charges go back to your retirement account, not to a bank or financial institution.
My experience with a 401(k) loan
When I took out a 401(k) loan, I found the process quite straightforward. After reviewing my plan's rules, I submitted a request and was surprised when I received the funds within a week without a credit check. The idea of making repayments with interest to my 401(k) account felt like borrowing from and paying back my future retired self.
You can only borrow up to 50% of your 401(k) balance, up to $50,000. The IRS requires repayment within five years, and you can typically take out one 401(k) loan at a time.
While this can work very well provided that you follow the requirements and repay the loan as required, it also could put your retirement at risk. You might have to repay your loan in full suddenly if you lose or quit your job. Failing to repay your loan could impact your retirement and may have tax implications, especially if you're under 59.5 years old.
5. Consider a debt management plan
- Someone helps negotiate lower rates or monthly payments on your behalf
- You make a single payment, and the credit counseling agency takes care of the rest
- There may be fees to use this service
- May require you to close credit card accounts
- Not all organizations are created equal
You can seek credit counseling services if you're overwhelmed and don't know where to begin regarding your debt. Certified credit counselors can help you with budgeting and money management, but they may also help you devise a debt management plan and negotiate with creditors.
Debt management plans typically require you to deposit money with the counseling organization, which they use to pay your creditors, usually for a fee.
A debt management plan can be beneficial if you struggle with timely payments and need someone to negotiate lower rates and follow a payment plan for you. They can often negotiate lower payments or bring down higher interest rates and help you clear your debt in 36 to 60 months.
If you choose this path, vet your options carefully. Look for organizations accredited by the National Foundation for Credit Counseling (NFCC) and research thoroughly to avoid ones you shouldn't trust.
Closing credit accounts may be a requirement of your plan. While on one hand this is a good thing, as it can prevent you from taking on more debt, it may be unrealistic and put you in a difficult situation.
Our recommended balance transfer credit cards
A balance transfer credit card could help you transfer existing credit card balances to a new card with a lower APR. Your best option is one that offers 0% intro APR for a limited time. Each of the cards included here also have no annual fee.
| Credit card | Intro APR | Balance transfer fee | Annual fee |
/images/2023/02/04/bankamericard.png)
|
|
3% for 60 days from account opening, then 4% | $0 |
/images/2022/04/27/0427_reflect.png)
|
|
5%, min: $5 | $0 |
/images/2024/12/16/citi-double-cash.jpg)
|
|
3% of each balance transfer ($5 minimum) within 4 months of account opening; then 5% of each transfer ($5 minimum) after the 4 month intro period ends | $0 |
/images/2024/10/14/chase-slate-edge.png)
Chase Slate Edge℠ |
|
$5 or 3% of the amount of each transfer, whichever is greater in the first 60 days, then $5 or 5% | $0 |
How to pay off credit card debt faster without refinancing
Refinancing can offer benefits that speed up your debt payoff journey, but I'd recommend looking into other options to decide whether you need that step.
Focus on your budget
It's always a good idea to do an audit of your budget before taking on any new loans or refinancing debt. If you've never tracked your income, that's a good start. Try one of these budgeting apps if you need a tool to assist you.
I've been shocked sometimes to realize where I've been spending more than I thought, and if I have debt to pay off, I look for ways to cut back on expenses and divert the extra money toward debt.
Increase your income
Easier said than done, right? Listen, I get it — not all of us have spare time to start a side hustle or a job where raises or overtime are possible. But if you're struggling with debt, it can't hurt to consider ways of bringing in more income.
If you have a few hours per week, you might be able to take on flexible gig work like becoming a rideshare driver or trying a side hustle for introverts like housesitting or delivering groceries. Maybe you only need to work extra for a few months to make a significant dent in your debt totals.
Try the debt avalanche
A very popular strategy is called the debt avalanche method and it relates to how you prioritize your debts. Between the avalanche and the snowball (more on that below), I prefer the debt avalanche because math-wise, you'll be debt-free sooner.
With the avalanche, you list all of your debts along with their amounts and interest rates. Then, pay minimums on every debt, but put any excess funds toward paying off the debts with the highest interest rates first. You can use this method with not only credit card debt, but other debts like vehicle loans.
As each debt disappears, you free up more money to put towards the lower-interest debts, continuing until it's gone.
Use the debt snowball
The debt snowball method is another well-known framework for paying off your debt. You list your debts and amounts, but don't worry about the interest rates.
Instead, you prioritize paying debts with the smallest dollar balances. (You always keep paying at least the minimum required to each credit card or other creditor.)
The idea behind the debt snowball is that it gives you quick wins. If you have three debts in the amounts of $400, $1,500, and $10,000, it makes sense to take care of the $400 debt as soon as possible. Then you have fewer debts to worry about.
*Note: If you choose to refinance credit card debt, that eliminates the need for a debt snowball or avalanche, since you no longer have separate debt accounts.
Credit card debt refinancing vs. consolidation
| Credit card debt refinancing | Credit card debt consolidation |
|
|
Credit card debt refinancing is one of several ways Americans can tackle their debt. Another common method is known as credit card debt consolidation. This method is most often used to reduce the number of outstanding balances a person has by paying off their credit cards using one credit card, personal loan, or other means.
Credit card debt refinancing can be a type of debt consolidation if you're transferring balances from more than one card to a new card and rate. Credit card debt consolidation combines or consolidates your credit card debts by paying them off with a loan or other means, so you only have one monthly payment toward the debt payment method you used.
Credit card debt refinancing and consolidation can have slightly different goals:
- Credit card debt refinancing: Often used to reduce interest rates
- Credit card debt consolidation: Often used to simplify your credit card bills by combining them into a single bill
Learn more about the differences between credit card debt refinancing versus debt consolidation.
Alternatives to refinancing credit card debt
There are several alternative options to credit card debt refinancing that can help you improve your financial situation, including debt settlement, debt management, and bankruptcy.
Use a debt management plan
Setting up a debt management plan often begins by contacting a credit counseling agency that can help negotiate your debt and repayment terms. The agency can then establish a repayment schedule for you to pay off your debt.
Credit counseling agencies act as a middleman between you and your creditors. Sometimes, you may directly pay the credit counseling agency, and then it pays your creditors.
Credit counseling agencies can be both for-profit and nonprofit organizations. Even nonprofit agencies may charge small fees. When vetting your options, make sure to work with an organization accredited by the National Foundation for Credit Counseling (NFCC).
Seek debt settlement
In some cases, a lender may be willing to settle your debt for less than what you owe. Credit card companies may consider a debt settlement to ensure you don't file for bankruptcy, which may eliminate the debt.
It may be worth trying a DIY version of debt settlement. Call your credit card issuer and ask if they are willing to settle your debt for a lesser amount. (I've never done this, and it sounds daunting, but I know people who have successfully negotiated their debts.)
Alternatively, you can also use a debt settlement company such as Freedom Debt Relief to benefit from its experience. However, beware of the risks to your credit and the fees you'll have to pay if the settlement goes through.
Find out more in our Freedom Debt Relief review.
Our recommended debt relief services
One of the methods to restructure your credit card debt is by getting help from debt settlement or debt relief companies. Here are some of the most reputable.
| Company | Fees | Minimum Debt | Learn More |
| National Debt Relief | 15% to 25% of the total debt enrolled | $7,500 | Visit National Debt Relief |
| Freedom Debt Relief1 <p>Our estimates are based on prior results, which will vary depending on your specific enrolled creditors and your individual program terms. Not all clients are able to complete their program for various reasons, including their ability to save sufficient funds. We do not guarantee that your debts will be resolved for a specific amount or percentage or within a specific period of time. We do not assume your debts, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice or credit repair services. Our service is not available in all states, including New Jersey, and our fees may vary from state to state. Please contact a tax professional to discuss potential tax consequences of less than full balance debt resolution. Read and understand all program materials prior to enrollment. The use of debt settlement services will likely adversely affect your creditworthiness, may result in you being subject to collections or being sued by creditors or collectors and may increase the outstanding balances of your enrolled accounts due to the accrual of fees and interest. However, negotiated settlements we obtain on your behalf resolve the entire account, including all accrued fees and interest. C.P.D. Reg. No. T.S.12-03825.</p> | 15% to 25% of the total debt enrolled | $7,500 | Visit Freedom Debt Relief |
| ClearOne Advantage2 <P>ClearOne Advantage, LLC is a debt settlement company, not a lender, loan broker, creditor, credit services organization, or debt collector. ClearOne Advantage, LLC does not assume or pay any debts; receive, hold or control funds belonging to consumers; or provide bankruptcy, legal, accounting or tax advice. You should review full program terms and conditions before enrolling. To the extent that any aspect of the debt settlement services relies on or results in the consumer’s failure to make timely payments to the consumer’s creditors or debt collectors, the use of the debt settlement services: (1) Will likely adversely affect the consumer’s creditworthiness; (2) May result in the consumer being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money the consumer owes due to the accrual of fees and interest by creditors or debt collectors. Not available in all states. Some third-party fees may apply. C.P.D. Reg. No. T.S. 12-03822.</P> | According to ClearOne Advantage, fees and costs vary by situation, so you will need to contact them for information. | $10,000 | Visit ClearOne Advantage |
| Accredited Debt Relief3 <p><i>© 2021 Accredited Debt Relief. Please note that all calls may be recorded or monitored for quality assurance and training purposes.</i></p><p><i>Accredited Debt Relief is a DBA of Beyond Finance, LLC. Beyond Finance, LLC provides debt consolidation services. Our clients who make all monthly program payments pay approximately 55% of their enrolled debt upon successful program completion, before program fees. Fees are based on a percentage of your enrolled debt at the time of starting the program and range from 15%-25% of your enrolled debt. Programs range from 24-48 months. On average, clients must save approximately 40%-50% of each debt due to an enrolled creditor before a bona fide settlement offer will be made. On average, clients receive their first settlement within 4-6 months of enrollment and approximately every 3-6 months thereafter from when the prior debt was settled. Not all Clients complete the program. Estimates are based on prior results and may not match your results. We cannot guarantee that your debts will be resolved for a specific amount or percentage or within a specific timeframe. We do not assume your debts, make monthly payments to creditors or provide tax, bankruptcy, accounting, legal advice or credit repair services. Program is not available in all states; fees may vary by state. The use of debt consolidation services will likely adversely affect your credit. You may be subject to collections or lawsuits by creditors or collectors. Your outstanding debt may increase from the accrual of fees and interest. Clients may withdraw from the program at any time without penalty and receive all funds from their dedicated account, other than funds earned by the company or fees paid to third-party service providers, as may be applicable. Read and understand all program materials prior to enrolling. Certain types of debts are not eligible for enrollment. Some creditors are not eligible for enrollment because they do not negotiate with debt consolidation companies.</i></p><p><i>Testimonials reflect the individuals' opinions and may not be illustrative of all individual experiences.</i></p> | 15% to 25% of the total debt enrolled | $10,000 | Visit Accredited Debt Relief |
Consider bankruptcy
If your situation is more dire and debt settlement won't work, you may need to think about bankruptcy. Though this handles your debt, I want you to realize that it's not an easy fix, so you should consider this only if you've exhausted all other avenues.
There are several pros and cons to bankruptcy, but instead of viewing bankruptcy as a failure, consider it a way to restructure your finances. It helps you discharge certain debts, stop collection calls and wage garnishments, and relieve your financial stress.
Depending on your situation, you may qualify for Chapter 7 or Chapter 13 bankruptcy. Both bankruptcy types can help you move past certain debts. However, you may lose certain assets and damage your credit score for several years.
Chapter 7 bankruptcy typically liquidates some assets and allows you to discharge most unsecured debts, while Chapter 13 bankruptcy involves creating a repayment plan to pay off your debts over a period that normally lasts 3 to 5 years.
FAQs
Do balance transfers hurt your credit?
The effect of a balance transfer on your credit score can be positive or negative, depending on your exact situation. A balance transfer may hurt your credit score if you go past the due date or if you continue to accrue debt on your credit cards.
On the flip side, a balance transfer may improve your credit score if you make on-time credit card payments and use your credit cards responsibly. Additionally, opening a new credit card account increases your total credit, which may lower your credit utilization and improve your credit score.
Will refinancing my credit card debt hurt my credit score?
The impact of refinancing your credit card debt on your credit score depends on the refinancing method you use. Your credit score may take a hit when you apply for a new credit card or a personal loan since they require hard inquiries that go on your credit report with one or more of the credit bureaus. But your credit score may recover once you establish a positive payment history and successful debt reduction.
What happens if I don't pay my credit card debt?
When you stop paying your credit card debt, your credit card issuer will charge you late fees, your balance will increase in line with your APR, and your credit score will likely drop. The longer you don't pay your credit card debt, the harder it may be to pay it off. Eventually, your credit card debt may be sent to collections, and you may be able to reach a payment plan with the collection agency.
Is it better to refinance or pay off credit card debt?
If you have the funds to pay off your credit card debt, it's probably better than refinancing your debt since paying off your debt eliminates interest charges.
However, suppose you can refinance your credit card debt using a 0% intro APR credit card for a year or more. In that case, you may benefit from putting your money in a savings account, earning interest on your savings balance, and making the payments needed to eliminate your debt before the 0% introductory APR period ends.
How long does it take to refinance credit card debt with a personal loan?
The amount of time it takes depends on the lender and your personal situation, but generally, it can take anywhere from a few business days to a few weeks. Some factors that affect the time frame are:
- How quickly you complete the personal loan application and submit the required documents, if any. These documents may include proof of income, bank account statements, or other documents.
- How fast the lender verifies your information, which may include performing a credit check or reviewing documents you submitted.
- How soon the lender approves your loan and disburses the funds to your bank account or to your creditors.
Make sure to compare credit card debt refinancing loan offers from multiple lenders and consult a credit counselor or a financial advisor before making any decision that affects your finances.
Bottom line
Credit card debt refinancing is a tool you can use to manage your credit card debt and pay it off over time. Credit cards with high APRs can be challenging to pay off because so much of your monthly payments go toward interest charges.
It can be a good idea to refinance credit card debt if you qualify for a lower APR, which means you'll pay the debt off more quickly and pay less overall. There are other versions of this, and a consolidation loan can be another form of refinancing.
/images/2023/04/13/ndr_full_horizontal_rgb.png)
National Debt Relief Benefits
- No upfront fees4 <p>Clients who are able to stay with the program and get all their debt settled realize approximate savings of 46% before fees, or 25% including our fees, over 12 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for various reasons, including their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period of time. We do not assume consumer debt, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice or credit repair services. Not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. Depending on your state, we may be available to recommend a local tax professional and/or bankruptcy attorney. Read and understand all program materials prior to enrollment, including potential adverse impact on credit rating.</p>
- One-on-one evaluation with a Certified Debt Specialist
- For people with $30,000 in unsecured debts and up
/authors/sarah_li_cain_updated.png)
Author Details
/authors/kate-underwood-headshot.jpg)
Author Details
