How to Refinance Credit Card Debt without Collateral

Refinancing credit card debt simply means paying down your entire balance with a new loan at a lower rate. This new loan can come in the form of a cash loan or by transferring your debt to another credit card. In either case, you will be making your payments to a new lender. This new lender will need to negotiate your loan, and the lender may want you to use collateral in order to secure the loan. There are many options for unsecured lines of credit, though, that will allow you to refinance your debt. 

Unsecured Personal Loan

A personal loan is typically a short-term, relatively low-limit option to pay off some debt. Most personal loans are unsecured. Depending on your credit score, you may have a very high interest rate if you opt for an unsecured loan. On the bright side, though, your interest rate will go up quite significantly if you pay the loan off in time.

Most credit cards do not charge you a fee to pay off your balance, which means you can simply take the loan, pay down the balance, close the card and pay the new lender. Then, after paying off your personal loan, you can open a new card at a lower rate due to your improved credit. You can also leave the card open, but you will not be able to take advantage of a lower interest rate, defeating the purpose of your refinance. 

Debt Refinancing Loan

There are lenders who specialize in refinancing debt. They will help you pay off your current debt in one lump sum, then they will offer you a new loan at a lower interest rate. These companies range in quality from excellent to predatory. Whenever you are considering taking a debt settlement, refinancing or consolidation loan, you should be very wary of the terms you are receiving on the new loan.

Whether you are taking a personal loan or a refinancing loan, you are ultimately left without your current credit card. It may be wise to take out the new loan in a high enough sum to provide you spending cash to replace your lost credit line. In both cases, do the math to ensure you are getting a better deal on the loan than you would get on the credit card.

Credit Card Balance transfer

The most common way to refinance a credit card is to transfer credit card balances. This means you will open up a new credit card with a different company and move all of your balance over. Many companies offer low introductory rates to entice you to transfer your balance. It is important to note these rates may adjust. It is also important to remember a balance transfer will negatively affect your credit.

However, if you aim to pay off your balance shortly after the transfer, you can take advantage of the low rates and incentives to transfer your balances. You can ultimately save a lot of money in lower interest rates on your debt. 

 


Improve Your Credit Score - Free Consultation