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The differences between debt consolidation and refinancing

On Behalf of | Jan 28, 2021 | Bankruptcy |

If you are a California resident who is struggling to pay your credit card balances, it may be a good idea to consider a balance transfer. If you also have student loan, auto or other types of debt, a consolidation loan might be a good way to reduce your monthly payments. Let’s take a look at the key differences between a balance transfer and a debt consolidation loan.

What’s a balance transfer?

Let’s say that you owe $1,000 on a credit card that charges an interest rate of 18%. If you paid that balance off in a year, you would pay $1,100 to your lender. However, you may be able to significantly reduce that interest by transferring the balance to a different card that charges zero interest. Most credit card companies offer interest-free financing for up to 12 months for new customers, and it may be possible to pay no interest for up to 24 months if you have an excellent credit score.

What’s a debt consolidation loan?

A consolidation loan allows you to combine all of your existing debt payments into a single balance. Most people consolidate their debt using the equity in their homes or by applying for personal loans. In most cases, the interest rate on these types of loan products is lower than what credit card, student loan or other lenders charge.

If you don’t have a home, don’t qualify for a personal loan or don’t qualify for financing at an affordable interest rate, you may want to consider filing for bankruptcy. A bankruptcy law attorney may be able to talk more about how you can eliminate or consolidate credit card, medical and other debt balances.

There are many options that might be available to help you lower your debt and create a stronger financial future. An attorney may be able to talk more about the potential benefits of bankruptcy such as obtaining a discharge without losing property.