What is the difference between credit card refinancing and debt consolidation?

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Credit card refinancing is the process of transferring credit card debt to another lender’s credit card or loan, with the goal of saving money on interest and perhaps consolidating multiple balances into one. But there is more than one way to go about refinancing credit card debt. The first is to do a balance transfer, where the debt gets moved to another credit card with a lower APR. The average 0% APR balance transfer period...

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Answer 1 · 2021-04-27 08:26:54

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Mary Grace McCormick, Credit Writer

@mg_mccormick • 04/27/21 This answer was first published on 04/24/20 and it was last updated on 04/27/21.For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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The difference between credit card refinancing and debt consolidation is the number of accounts involved. Credit card refinancing usually involves one debt, while debt consolidation involves merging multiple debts. Both credit card refinancing and debt consolidation allow borrowers to reduce the cost of paying off existing debt by lowering the interest rate applicable to the debt, when done successfully. As a result, when you consolidate debt, you are technically refinancing it, too, assuming the terms are different from those of your original lender(s).

Credit cards and loans can both be used for refinancing or consolidation. However, when the terms “credit card refinancing” and “debt consolidation” are used together, they’re usually comparing a balance transfer credit card to a debt consolidation loan. So, for the purposes of this answer, “credit card refinancing” will refer to using a balance transfer credit card to reduce the cost of a debt, and “debt consolidation” will refer to combining multiple debts with a single loan.

Here are the differences between credit card refinancing and debt consolidation:

Category	Credit Card Refinancing	Credit Card Debt Consolidation
How to do it	Make a balance transfer, preferably to a 0% APR card	Take out a personal loan, home equity loan or HELOC
Benefits	0% financing for 6 months to 2 years possible Fast funding if you already have a card	Lower APRs than credit cards’ regular APRs, on average Funds can be used to pay off any debt
Drawbacks	High regular APRs after 0% expires May not be able to transfer certain types of debt Balance transfer fees	May not be able to find a loan with a lower APR than existing debts May have to pay additional fees to open the loan
Who it’s best for	People with small debts that they can pay off in less than 2 years	People who have multiple debts and need longer to pay them off

Ultimately, the choice between credit card refinancing and debt consolidation comes down to your specific debt situation and credit score. Once you have made a decision, prioritize your monthly payment obligations and practice good financial habits to avoid future debt problems.

What is the difference between credit card refinancing and debt consolidation?

Mary Grace McCormick, Credit Writer

Here are the differences between credit card refinancing and debt consolidation:

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