When it comes to the question of credit cards versus refinancing loans, a lot of us aren’t quite sure which direction to take. I mean, we see a whole lot of press coverage about the former versus the latter, so it can certainly appear as though credit cards are the better deal overall. However, is that really the case?
Honestly, the answer is probably no to that one. However, that’s not to say that there’s no role that credit cards can play in maintaining a healthy financial status and credit history. The main thing is that we probably shouldn’t be overly reliant upon these credit cards to cover all of our debts.
If you’d like to know some of the alternatives, and what you can safely achieve with a credit card, make sure you stick around! As with most things related to money, there are pros and cons involved, and I’ll be covering them in as much detail as I can.
Credit Cards: How they Work
Now, I’m sure that most folks are quite familiar with credit cards already. However, I do think it’s worth explaining them in a bit more depth since most of the time our education on them is quite cursory. The main thing to know is that they serve as a sort of “revolving door” of credit.
However, that does mean that the interest rates that you’re charged are going to end up a lot higher than they do for something such as a personal loan. Unless you’re able to quickly pay off the money that you’ve borrowed with your card within that month, you’ll get charged interest on the balance.
Over time, that will keep building and building, and that’s what makes credit cards so “dangerous.” Obviously, when used responsibly, they’re completely fine. Most financial experts recommend caution because of the slippery slope you can wind up on if you do overspend with them. Just be aware of that as you utilize your cards – especially if you end up wanting to refinance a loan with one.
What is Refinancing, then?
Now that we’ve covered credit cards in more depth, let’s take a peek at refinancing. It’s something I wasn’t super familiar with until I looked into how I would be able to adjust my monthly payments for my student loans. That’s when I discovered that one of the very few ways to achieve that is to refinance them.
What’s involved in refinancing, then? It seems a little complicated at first glance, but at the end of the day it’s a pretty simple process. Essentially, you submit an application with either your current lender or a new one for a loan that you will use to pay off the previous debt so that it’s all under the terms for the new contract.
So, the overall goal, of course, is to get a better contract the second time around. In my case, my goal was to get lower monthly payments. Of course, you might want to do something different, but it’s not too difficult to simply specify that on your initial application for the refinance loan.
Personally, since I didn’t really know what I was doing, I utilized kredittkortrefinansiering.com/, though there are plenty of resources like it. I just find that getting some external assistance can be quite helpful for anyone who isn’t exactly sure what they’re looking for or how to go about starting this process. After all, it can be rather confusing if you’re just starting out!
Anyhow, though, one of the other things that people try to accomplish with refinancing loans, be it a traditional style of loan or through a credit card, is to get a lower interest rate. Typically, that’s the big selling point, even though it wasn’t specifically what I was aiming for. In general, it’s something that can be really beneficial for borrowers.
With a definition under our belts, its time to take a look at some of the reasons that people do end up deciding to refinance their debts. I sort of already mentioned them above, admittedly – for the most part, the goal is to reduce monthly payments or to adjust the interest rate. However, there are some other motivations a person might have for wanting to do this.
As you can see in this article, going through this process can achieve a few other things as well. Interestingly enough, it can actually help to give you a better idea of your overall financial situation. Since you are actively looking back at contracts and your other debts at the same time, you’ll be getting a sense of how you’re doing overall as well.
Of course, that’s more of a “side effect” than pure motivation, though. Overall, the goal is to reduce your costs. How you do that, of course, will be up to you and your lender to hash out. At the end of the day, they’re still looking to make a profit off of the credit agreement, and it’s important to understand that as borrowers. You may not always get the most favorable deal here, and there’s also no guarantee that you’ll be approved for refinancing if you apply.
How do Credit Cards Relate?
So – you’re probably still a bit confused as to how credit cards play into all of this. Well, there are two answers, really. First off, you can actually use a credit card with a high maximum possible balance to refinance other debts. Now, this is not always the most recommended course of action because of how high interest rates can be, but there are certain cards specifically dedicated to this purpose.
If you’re able to find one of those, then it could very well be a solution for you! However, unfortunately, they are a bit difficult to find. Thanks to that, there’s a much higher chance that your new “refinanced” debt would end up being a bit more expensive than your old ones. Sure, the card can make it convenient, but it’ll be up to you to decide whether or not you want to sacrifice that for the higher price.
Additionally, though, if you are refinancing a large portion of (or all of) your debts, you can include your credit card balance in that sum! This can be a pretty big deal, considering how high interest rates are for most credit card accounts. If you’re able to shift that debt into a loan that has a lower one, you’re saving yourself a fair bit of money.
Since that’s typically the overall goal for most folks who decide to go through the refinancing process, that’s obviously going to be a big perk. Be sure to double check that your lender is okay with this, though, just in case. More often than not it will be totally fine, but personally, I always prefer to double check before just going ahead.
Depending on where in the world you’re trying to refinance, you may run into a bit more difficulty. What I mean by that is for example, in Norway, you will probably have to provide some proof that you’re going to be able to make repayments on this new refinanced debt. If you can’t, then you will likely get rejected.
So, bear that in mind as you submit your applications. Seeking international options is definitely something to try, but since there are different regulations between nations, there might be some research involved on your part. Of course, that’s not a deal breaker (at least, for me it isn’t), so why not go for it still?
Once you think you’re prepared, go ahead and submit that application. The worst thing that can happen is a rejection, and that’s bound to happen at some point. You can always keep trying!