How to Refinance Credit Card Debt

Credit card debt is one of the most common forms of debt and can be overwhelming. One way to ease the pressure of the debt is to refinance your credit card debt. There are a few options that you can take: 

Mortgage Refinance

One popular way to get the cash you need is to refinance your existing mortgage. If you have been in your house for several years, there is a good chance that you have built up some equity. This equity can be used to pay off all of your consumer debt. If you have enough equity, you could just lump all of your payments into one. Your cars, student loans, credit cards, and house could all be included into one loan. This is a popular method to consolidate everything into one monthly payment.

The biggest drawback of this finance option is that you will be paying for your credit cards and car for the next 30 years. In addition, you will have to considerably change your habits because you have to restrain yourself from getting into debt trouble again. This should be a one-time fix and you should consider taking debt courses to help change your spending patterns.

Home Equity Loan

Another popular method for debt consolidation is the home equity loan. This is similar to refinancing except that you just take out a small loan using the equity on your house as collateral. This could also be called a second mortgage. The rate for the home equity loan will be lower than your credit cards and you can just make one small monthly payment.

This type of loan usually requires a lot of equity in your house, so if you just bought your house, this probably will not be possible. 

HELOC

A home equity line of credit (also called HELOC) is another method that is very similar to a home equity loan. The main difference with this method is that you have an open line of credit for as long as you wish.

The maximum that you can borrow is the total equity of your house. You will usually be given a checkbook that will be connected to the line of credit. When you need money, you just write a check and it will be added into your home equity line of credit. You do not have to borrow a set amount of money as in a home equity loan, but the temptation to keep spending is great with this type of loan. 

Balance Transfer

If you have small balances on two or three credit cards, transfer them onto one larger card with an introductory 0% APR. There are many credit card companies that will give you 0% interest for a year. If you think you could pay off the debt within a year, this is a good method. If you think it will be longer than a year, this method may not help you.


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