Q. We want to refinance $ 14,000 in credit card debt. How can we do that?
– drown there
A. Congratulations on your journey to being free from credit card debt.
How you consolidate your debt will depend on your overall debt amount, your credit rating, and other factors, such as your payment history.
Consolidating your credit card debt works if the new debt has a lower Annual Percentage Rate (APR) than you currently have, said Betty Thomas, Certified Financial Consultant and Certified Financial Planner at Peapack Private Wealth Management in New York. Providence.
This move could lower your interest charges, make payments more manageable and potentially shorten the repayment period, she said.
One option to consider is a debt consolidation loan, also known as a personal loan. It’s an opportunity to consolidate the total amount of credit card debt into one loan, Thomas said.
âYou would have a fixed monthly payment based on the interest rate and the length of the loan,â she said. âAt the end of the loan term, the debt would be paid off. This would save money on interest charges.
Thomas said the average interest rate charged on credit cards is around 16%, so the rate on a consolidation loan should be lower.
It is important to know that the lender can determine the interest rate based on the length of the loan you are applying for and your credit rating. Therefore, knowing your credit score is important, she said. The better your credit score, the better the interest rates available to you.
You can check your scores for free once a year at AnnualCreditReport.com.
Another option is a balance transfer to a credit card that offers an introductory 0% APR.
âThese offers are generally short term, such as 6 to 18 months and there might be a balance transfer fee,â Thomas said. âTransferring your debt to a 0% card would give you the option of paying off the debt without interest. “
When you transfer debt, remember that you can only transfer up to the credit limit offered by the card, she said. If the credit limit is not enough to cover the amount you want to refinance, you will need to look for other options for your remaining credit card balance.
âThe caveat against these offers is that if you are unable to pay the balance during the introductory period, accrued interest would be due and any remaining balance would be subject to a higher interest rate,â he said. she declared. âAgain, you should have a good or an excellent credit score when looking for this type of offer.â
Email your questions to [email protected].
Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com‘s weekly electronic newsletter.