Should I Refinance My Credit Card Debt?
by Ellise Walsh

As interest rates on mortgage loans, personal loans, auto loans and personal savings have fallen, credit card rates have not followed suit. Interest rates on credit card debt remain very high, particularly when compared to interest rates on other types of loans. If you find yourself stuck with large amounts of high interest credit card debt, it may be worth your while to refinance that debt at a lower rate.

Using a personal loan or home equity loan to refinance credit card debt can make a lot of sense. Just shaving some points off the interest rate can potentially save you hundreds of dollars per month, in addition to clearing your credit card debt and potentially upping your credit score.

It is important, however, to refinance that debt the right way, and just as important to make sure the debt does not return. The last thing you want to end up with is a big debt consolidation loan plus a bunch of new credit card bills. It is important to do some plastic surgery and get rid of those credit cards after they have been paid off. Keep one card (and only one card) for emergencies and make sure it is paid off at the end of each billing cycle.

After the credit card debt has been paid off, it is a good idea to create and stick to a monthly budget. It is surprising how many people do not take the simple step of creating a simple budget plan, and doing so can help you get a handle on your finances. Simply by keeping track of your daily living expenses, you may be able to find lots of money that has been leaking out of your wallet.

There are many places to get a debt consolidation loan with which to pay off your credit card debt. Your local bank, savings and loan or credit union will be able to give you information on the personal loan products they have available. When you receive the money from the personal loan, you simply use those funds to pay the high interest credit card debt. You are then left with only the monthly payments on the personal loan.

Homeowners can opt for the lower interest rate and tax deductibility of a home equity loan or home equity loan of credit. If using this option, however, it is even more important to make sure you do not incur more credit card debt. Never lose sight of the fact that you are pledging your home as collateral on a home equity loan. Failing to make the payments on a home equity loan could put your house at risk.

No matter how you do it, getting a handle on your credit card debt can result in big savings and better credit. The sooner you get started on the debt consolidation process the better off you will be.



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