How to Refinance Your Credit Card Debt

If you’re falling behind on payments on several credit cards, one option that you should consider is refinancing your credit card debt by consolidating your payments.

If you’re in debt you are probably paying the minimum you can on your monthly payments, thus not getting any closer to paying off your debt. This means that month after month you’re paying an interest rate – money that you never used but are forced to pay – while getting no closer to being debt free.

Consolidating your debts into one loan with one interest rate will save you money by decreasing the amount you owe towards different interest payments. Credit cards usually come with very high interest rates so transferring the debt into an unsecured personal loan or some kind of secured loan will definitely be in your best interest.

•    Discuss your plans with your creditors. Often times people who fall in debt try to hide from their creditors thinking that this will buy them more time. In fact, the reality is quite the opposite. The more open and communicative you are with your creditors the more likely they are to provide you with options to help your situation. Many times you can negotiate with creditors to low your interest rates.
•    Only borrow as much as you owe. You may be tempted to take out a large loan to pay off your credit cards and more, but this will only increase your interest and the amount of time you will be making payments. Find out how much you owe and take out a loan for that amount. Transfer your debt into your new loan so you only have one interest rate and one payment.
•    Try to avoid secured loans. Unless you are sure that you will be able to pay off your debt under the new plan, avoid turning to a secured loan because it will risk whatever collateral you put against your debt.
•    Cancel credit cards as soon as the debt is paid. Don’t make additional charges on the card. As soon as your debt has been paid off cancel your credit cards. Once you’re in the green take out a credit card with favorable terms and be cautious with it. Make sure that you don’t charge more onto the card than you can afford to pay off.

Debt consolidation can help you solve your debt problems and avoid bankruptcy. There are many debt consolidation services that can help you get out of debt. Understand that these companies will require a fee too. In tight financial times it is crucial to read all fine print to understand exactly what you’re getting into.