Debt Consolidation vs Credit Card Refinancing Differences

difference between debt consolidation vs credit card refinancing

Credit cards can be a great tool for building credit. The ability to make purchases in- store and online instantly without cash can make life easier. However, eventually, the credit card bill comes for those purchases. There may be instances when the debt builds up and becomes difficult to pay off, but there are options that can help you pay down this debt, such as debt consolidation.

Companies like Freedom Debt Relief are experts in debt consolidation and credit card consolidation; with help from one of the counselors you can make an expert decision on what is best for you. So, what is the difference between debt consolidation and credit card refinancing?

What Is Credit Card Refinancing?

Credit card refinancing simply means transferring debt from one or more credit cards to a single 0% interest card. There are credit cards that offer introductory 0% interest rates for a limited amount of time, usually around 12-18 months.

A consumer’s credit score needs to be high enough if considering this option, above 670 in order to get a longer 0% rate. The limit on the new card will also need to be high enough in order to transfer all of the debt. Lastly, there will be a transfer fee, depending on the card, it may be anywhere from 3%-5%, so keep that in mind as well.

What Are The Pros And Cons Of Credit Card Refinancing?


• You can save money if the new card has a big enough limit to include all of the debt

• No interest payments for the length of the 0% interest rate period

• Easy to apply for and a quick response time

• You can eliminate the debt if you’re able to cut out credit card use


• Not everyone will qualify for a 0% rate

• There is a time limit on the 0% interest rate, if you are unable to pay it off by then, you will be paying a larger interest rate

• The credit limit will need to be high enough to transfer all of the debt

• Balance transfer fees of 3%-5%

• If you make a late payment, you run the risk of losing the 0% interest rate

• You may not be able to transfer balances between cards issued by the same lender

What Is Debt Consolidation?

Debt consolidation, while similar to credit card refinancing is different and has separate pros and cons. In this option, you would apply for a loan to pay off credit card debt. Loans such as personal loans from banks or even family members that do not need collateral or a home equity loan, which requires your house as collateral.

Personal loans may be harder to get because it requires no collateral meaning it comes with a higher risk to lenders, you also won’t be able to get a 0% interest loan but the interest will still be lower than credit card interest rates. Home equity loans require a steady income, a good credit score and equity in your home.

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What Are The Pros And Cons Of Debt Consolidation?


• Low interest rates

• A repayment period of 3-5 years

• Fixed monthly payment

• A personal loan doesn’t require collateral

• One monthly payment instead of several credit card payments


• If you choose a home equity loan, you put your house up as collateral and if you are unable to make payments, you risk losing your house to foreclosure.

• A personal loan can take a long time to process, which means you will be waiting for an answer.

• The fees associated with loans can add up.

• Your credit score may not qualify you for the best rates

• You may be paying off the loan for 3-5 years and if you cannot stop your credit card use then you may be stuck with more debt to pay off.

Which Option Is Best For Your Finances?

Choosing how to deal with debt consolidation can be difficult and tricky to pay off your debts once and for all. Learning everything you can about the difference between credit card refinancing and debt consolidation, weighing the pros and cons of each, considering your personal circumstances now and in the future is the sure-fire way to making the absolute best decision for your financial situation.