Can You Refinance Credit Card Balances with a Debt Consolidation Loan?

Learn how to consolidate credit card debt effectively. Most financial advisors recommend credit card debt consolidation through a 2nd mortgage, personal loan, home equity line of credit or credit card debt settlement program, as it eliminates adjustable rate interest and reduces monthly payments.
BD Nationwide will connect you with financial experts so you can find the best way to consolidate credit card debt.

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Popular Methods for Credit Card Debt Consolidation

Credit Card Balance Transfers

A balance transfer credit card enables you to transfer existing balances from other credit cards. If you qualify for a card offering a 0% introductory balance transfer APR, you can save on interest during this period.
This debt reduction plan allows you to make headway in paying off existing credit card debt without accumulating additional interest. Clearing the entire balance before the introductory period ends helps avoid additional interest charges. It is very important to realize that this is usually only a temporary solution.

Credit Card Consolidation Loans

Credit card consolidation combines multiple debts into one loan with a single monthly payment, ideally at a lower interest rate than the average of previous loans. Qualifying for a lower rate on a credit card consolidation loan can result in significant savings on interest over time.

Simplifying monthly payments by consolidating multiple debts into one monthly payment can be more manageable.

Home Equity Loans or Lines of Credit

Secured by your home’s value, home equity loans and lines of credit (HELOC) offer lower interest rates than unsecured loans. Repayment terms are typically longer, with lower monthly payments.

Some home equity credit lines have interest-only payments during the initial draw period (usually 10 years). However, these attractive home equity loans carry the risk of home loss if payments are not made.

Another factor to consider is that closing costs, range from 2 to 5% of the loan amount, and annual fees for some HELOC loans are factors to consider.

Unsecured Personal Loans

Personal loans serve various purposes, including home renovations or debt consolidation. They can be secured or unsecured, with unsecured loans not backed by collateral like home equity or a vehicle.

Repayment involves regular monthly payments. When contemplating using a personal loan for credit card debt consolidation, compare the loan’s interest rate with the existing interest rates on the debts you plan to consolidate.

While personal loan rates might be relatively high, they could still be lower than your current credit card APR, especially with excellent credit. Be aware of potential fees like origination fees, late payment fees, prepayment penalty fees, and application fees.

401K Loans

Utilizing a 401k loan through your employer allows you to borrow a portion of your vested balance, either the greater of $10,000 or 50%, or $50,000, whichever is less. The interest rate is generally lower than credit cards and personal loans, and interest paid goes back into your retirement account.

Approval is simpler, with no credit check, as the loan is secured by your retirement savings. Repayment is usually required within five years, and if you leave your job, the loan becomes due in full within 60 days.

Debt Management Options

A debt management plan involves an informal agreement with lenders to pay off existing debt through one monthly payment to a credit counselor. Qualification requires being up to date on payments and owing a minimum of $1,000 in unsecured credit card debt.

A credit counselor negotiates lower interest rates and possible fee waivers. While it doesn’t involve taking out a new line of credit, existing lines may need closure as part of the program.

Why Loans to Consolidate Credit Card Debt Are So Popular

BD Nationwide provides an introduction to financial professionals that assist borrowers with credit card debt consolidation loans with high LTV second mortgages and fixed-rate refinancing to achieve lower monthly payments and facilitate debt reduction.

According to economic reports, the average household of homeowners carries between $18,000 and $25,000 in credit card debt each month.

Potential Risks with Consolidating Credit Card Debt with a Mortgage

Consolidating credit card debt into a home equity loan or 1st mortgage can pose a potential risk to your home, because these debt consolidation mortgages are considered secured loans.
Even if you can effectively handle your mortgage payment, combining credit card balances with your mortgage may have adverse consequences if you continue accumulating debt on your credit cards. It might be advisable to explore assistance from nonprofit credit counseling to manage and settle your credit card debt more effectively.

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However, leveraging the equity in your home to consolidate credit card debt into your mortgage won’t actually reduces your total debt. While you may decrease the balance on your credit cards, the amount borrowed from your home equity will be incorporated into the new mortgage balance.
If you consolidate your credit card balances into a simple interest loa, like a mortgage and you significantly reduce your monthly payments because of lower interest rates, it may be the prudent choice.

Compare Secured and Unsecured Credit Card Debt Relief

To consolidate credit card debt through a secured debt loan, typically, one needs good credit, a stable income, and a certain amount of home equity. Breaking the cycle of high-interest credit card debt can be challenging for many Americans. A Credit Card Debt Consolidation loan from a trusted lender could offer assistance.
Nationwide lenders offer free consultations to homeowners seeking to eliminate credit card debt from their finances. Trained loan officers will assist you in finding a credit card debt relief solution that converts your revolving debt into a fixed interest rate, potentially saving you hundreds of dollars each month.

Is it better to pay down my credit cards with my savings or pay off my credit card debt with a second mortgage?

We recommend that you refinance all revolving debts into simple interest loan that offers tax deductibility like a second mortgage or a home equity loan. Paying off credit card debt can eliminate future compounding interest from hinder your savings.

Consolidate your loans and credit card debt now!

With a home equity loan for debt consolidation from Nationwide lenders can merge your debts into a single, low monthly payment, saving you thousands of dollars annually by eliminating compounding interest.
Linda’s Tip for credit card debt consolidation — Ask Linda?

“Wake up homeowners! Personal credit cards don’t have the same tax advantages as a debt consolidation second mortgages have for deducting mortgage interest. You will save money by consolidating credit cards in a secure loan. It is amazing what happens when you eliminate the compounding interest your credit card companies enjoy calculating each month.”

With a Credit Card Debt Consolidation loan, you could consolidate those debts and have one low monthly payment. Potentially, you could save hundreds or thousands of dollars! Before committing to refinancing credit card debt into a secured mortgage, consider the risks first.