Your credit card debt is costing you money. With the average credit card APR pushing 19.8%, paying back the interest let alone the original credit can feel relentless and overwhelming.
At Leap, we offer peer to peer loans to cover the costs of your debts with an estimated APR of 9%. Together we can refinance for the better. Explore how credit card refinancing and debt consolidation can save you money.
Why Should You Refinance or Consolidate Your Credit Card Debt?
‘Put it on the credit card’ has slipped into the everyday rhetoric. It doesn’t sound like a serious problem. It’s normal. And when used cautiously, credit cards aren’t a bad thing at all. But the UK owes over £72 billion in credit. Now that’s a serious problem.
According to The Money Charity, the average UK household holds around £2,649 worth of credit card debt. On top of that, the average credit card interest rate as of March 2019 is 19.81%. At Leap, the estimated APR on a £3,000 Leap loan over three years is 12.25%.
What’s more, simply making the minimum payment on large credit card allowances and high-interest credit is something that credit providers rely on.
The Money Charity calculated that the average time it takes to pay off your credit card debt by making the minimum payment per month would be 26 years and 7 months. So by using your credit card for what may seem like a quick fix, could take over your paycheque for the next thirty years.
Credit card users are often stuck in this cycle of debt for longer, paying more and more in interest, and ultimately filling the pockets of credit card companies and banks while leaving a big hole in their own.
A personal loan provider, such as Leap, would generally offer a fairer monthly repayment to keep you on track, ensuring that you pay off your debt quicker and save a lot more in interest in the long run as a result.
The Difference Between Credit Card Refinancing and Debt Consolidation
If you’re stuck making minimum payments and can't afford to put more towards paying off your debts you could either refinance your credit card or consolidate your debts to help. Explore the differences and find out which route is better for you.
What Is Credit Card Refinancing?
When you refinance your credit card debt, you are effectively moving your debts from one card to a new card with a lower interest rate. Usually, you would move the debt to a card with a promotional 0% introductory interest offer with the aim to pay off your debt within that time. Thus reducing the overall amount of debt and interest that you have to pay.
What Is Credit Card Debt Consolidation?
Credit card debt consolidation is usually the likely option if you have multiple credit cards, or a variety of debts bills to pay every month. Rather than juggling multiple payments and interest rates, you take out an unsecured loan to pay them all off in one go. It’s convenient. It’ll save you money. You will benefit from lower interest rates, the flexibility to pay off more debt a month, and rewards for staying on track or exceeding your goals.
How Should You Pay Off Your Credit Card Debt?
If you have a relatively low level of credit card debt or are confident that you can pay off your debt before an introductory interest rate period expires, credit card refinancing might be the best choice for you. It will allow you to lower your interest rate immediately, and gain the benefits of paying no interest while you devote your extra cash to your debt.
However, if you are not sure if you can pay off your debt in full within 18 months or want to be sure that you pay off your credit cards entirely with the stability of a fixed monthly payment, a debt consolidation loan might be the better option. With fixed interest rates and a term of three to five years, you can plan your payments to get out of debt.
Tips For Reducing Your Credit Card Debt
There are a couple of ways you can help reduce your credit card debts, some are quick fixes and some may take a little more time and energy.
Increase Your Monthly Repayments: Find areas to cut back in your budget and put more towards your credit card repayments. With credit card refinancing and credit card consolidation, the aim is to have one monthly repayment so you can put more towards paying off your debts and clear it quicker.
Avoid Unnecessary Fees: Set up direct debits and alerts on your account to make sure all of your payments are made and are made on time. Not only do the charges and interest add to your totals debts, but defaulting or making late payments could have a damaging impact on your credit score.
Improve Your Credit Score: Find out your credit score for free, using websites such as Noddle, and work towards improving your credit score. Having a better score means you can secure the best rates on loans, so if you chose to consolidate your credit card debts, you’ll have the lowest interest rate possible and reduce your overall debt.
The Ultimate Guide to Credit Card Refinancing: Key Takeaways
- If you’re juggling multiple credit card repayments a month they can become hard to track and you’re more likely to make late payments or default. There are different strategies to streamline these repayments.
- Credit card refinancing is the process of paying off your high-interest credit cards with one low-interest or introductory 0% interest card to stop the overall debt increasing.
- Credit card consolidation is when you take out a low-interest loan, like a peer to peer loan, in order to consolidate all your payments into one monthly repayment.
- Other ways to reduce your overall credit card debt includes increasing monthly repayments, avoiding unnecessary fees and improving your credit score.
See how much you could save by refinancing with a Leap loan >>