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Having worked in the personal loan industry for many years, I found myself confused of the differences between credit card refinancing vs. debt consolidation. The goal of this article was to explain credit card refinancing vs. debt consolidation and provide pros and cons to each option.

Credit card refinancing traditionally refers to when you transfer credit card debt to another credit card with the goal of saving money on interest. Debt consolidation refers to consolidating your debt into one loan to pay off many or all of your debts.

The confusion lies in the fact that many lenders offer a credit card refinancing debt consolidation loan, which seems to contradict each other, but it generally means that the majority of the funds will be used to pay off credit cards rather than other installment loans. I wanted to add some pros and cons to both options to help you make the best decision.

Credit Card Refinancing:

This explanation will be for a true credit card refinancing or balance transfer. With recent low interest rates, some people receive mailers stating to transfer balance and get a limited time 0% APR on his/her credit card debt.

Credit Card Refinancing Pros:

1) Interest Rates: These can have some of the best interest rates.

2) Choice Flexibility: Banks generally compete for your business, so you could potentially negotiate for the best interest rate.

Credit Card Refinancing Cons:

1) Banks offer these because there is a belief that you will not pay off the entire balance when the balance is due, so bank will incur future interest from you. If you are able to save up the money to pay off the entire balance when due, this may not be a con.

2) If you do not close the credit cards you are transferring from and incur new debts onto those cards, you could be in a worse situation than when you started.

Credit Card Refinancing vs Debt Consolidation Credit Cards

Debt Consolidation:

There are clear pros and cons of debt consolidation which we consider below.

Debt Consolidation Pros:

1) Better Rate: You can receive a better rate than your current debt combined.

2) Simplify your life: It’s easier to pay off one payment per month than 5-10 different payments.

3) Preservation of your credit: With options such a debt settlement, your credit score may be hurt in the near term, so a debt consolidation loan can help preserve your credit.

4) Fixed payoff: You can be debt free in a specific period of time if all your debt is consolidated.

Debt Consolidation Cons:

1) Similar to the credit card refinancing option, it can be difficult to put 100% of loan proceeds to pay off existing debt and not incur new debt. In the case where you take a loan and continue to incur new debts on your previous credit cards, you may be worse off than you originally started.

2) You have to apply and get approved. If your debt to income ratio is high, you may not qualify.

3) Origination fee and APR may be higher than existing debt.

Credit Card Refinancing vs Debt Consolidation Loan Application Approved


Everyone’s situation is different, so feel free to take our debt consolidation form, comment below or contact us directly to see whether we believe any of these could be right for you.

Post Author: Ben Tejes

Ben Tejes is a co-founder and CEO of Ascend Finance. Before Ascend, Ben held various executive roles at personal finance companies. Ben specializes in Chapter 13 Bankruptcy, Debt Settlement, Chapter 7 Bankruptcy and debt payoff methods. In his free time, Ben enjoys spending time going on adventures with his wife and three young daughters.