Finding the Best Personal Loans for Credit Card Refinancing
Americans hold over $930 billion in credit card debt currently charging extortionate interest rates exceeding 19% APR on average. Refinancing high-interest revolving credit balances using fixed rate personal installment loans saves borrowers thousands in interest while consolidating debts for easier management.
But identifying reputable lending sources and comparing terms to access the most affordable personal loans merits research upfront. This guide examines smart strategies for leveraging personal loans to refinance credit card balances prudently.
Why Refinance Credit Cards with Personal Loans
Relentless credit card interest compounds monthly on outstanding balances giving little hope for struggling households to get ahead. Even minimum payments only chip away at accruing interest charges, not actual debt principal!
Transferring balances to a fixed rate personal loan makes repayment finite by locking in consistent installment payments over a set duration. Savvy borrowers convert variable 20%+ credit card rates to secure sub 10% personal loan rates all online in minutes.
Just ensure your credit profile allows qualifying for enough personal loan funds to consolidate ALL balances, not just portions of existing card debts. Partial consolidations deliver underwhelming savings. Put everything under a single reduced rate loan for simplicity and guaranteed savings each month.
Know the Math Before Borrowing
Will consolidating credit cards with a personal loan actually achieve long term savings? Crunch the numbers using credit card refinancing calculators before assuming so.
Quantifying potential interest cost savings matters more than lowered regular payment amounts which often trend higher under personal loans than minimum card payments. Don’t transfer debt just to lower regular dues if overall interest paid balloons much higher!
Powerful web tools from NerdWallet and Credit Karma compare personalized loan terms side-by-side with credit cards. Contrast total lifetime borrowing costs across both models based on realistic rates extended to your credit tier. Ensure total interest savings exceed any origination or transfer fees before moving forward.
What Credit Score is Needed?
Qualifying for affordable personal loan rates hinges largely on applicant credit scores. Those holding prime credit exceeding 680 FICO enjoy the best rates under 10% APR commonly from multiple lenders. But subprime borrowers aren’t disqualified.
Platforms like Avant, LendingPoint, and Upgrade offer debt consolidation loans to cardholders with poorer scores in the 600s at relatively reasonable rates under 20%. While higher than prime offerings, reducing revolving credit card rates still provides noticeable savings.
Check scores for free using Credit Karma or borrower tools from your bank. Pay down balances below 30% of limits, resolve errors on reports, and satisfy collection accounts to boost your rating before applying for cards. Every 10 point increment unlocks better loan rates.
Compare Loan Terms Not Just Rates
All lenders highlight tantalizing low rates upfront. But meaningful term variations exist beyond quoted rates impacting borrowing costs significantly. Evaluate these key Loan Fees & Conditions during comparisons:
- Annual Percentage Rates (APRs) – Encompass interest rates PLUS origination/admin fees
- Origination, Application, or Processing Fees – 1%+ fees common lowering loan proceeds
- Early Repayment Penalties – Most personal loans allow prepaying principal without fees
- Time Until Loan Proceeds Payout – Best lenders fund in under week after approval
Avoid lenders delaying direct card balance payments or imposing prepayment penalties. This erodes practical savings from rate arbitrage. Verify how and when balances get addressed on your behalf contractually.
Top 5 Lenders for Credit Card Refinancing
Thousands of banks and financial technology online lenders compete for refinancing credit card seekers. Prioritizing offers from these top ranked providers ensures reputable terms and service:
- Advertised Rates: 2.49% – 9.85% APR
- Loan Amounts: $5k – $100k
- Highlights: No fees, same day funding, flexible terms
- Rates Starting: 5.74% and up
- Loan Amounts: $5k – $100k
- Highlights: Unemployment protection, free financial tools
- APR Rates: 7.23% – 17.88%
- Loan Amounts: $1k – $50k
- Highlights: Fast approvals, all credit considered
- Rates: 6.95% – 29.21% APR
- Loan Amounts: $1k – $40k
- Highlights: America’s biggest P2P lender
- Rates: 6.24%-17.65% APR
- Loan Amounts: up to $50k
- Highlights: Terms up to 5 years, no prepayment penalty
Should I Use Savings Instead of Loans?
Some prudent savers elect dipping into their emergency funds or liquid cash to pay off credit card balances outright rather than shifting debts. This conserves maximum money by avoiding all interest payments completely!
Just ensure your budget tolerates diverting savings temporarily to eliminate cards. Rebuild depleted cash reserves steadily in coming months without adding new debts. Saving upfront never hurts provided accessible funds exist. Compare options objectively along these lines:
- How fast can liquid savings rebuild if invested directly paying off card balances instantly?
- Will paying credit cards with savings let me reallocate freed up monthly cash flow towards goals quicker?
- What returns (rewards rates, investment earnings, etc) compare if money gets saved/invested over taking out cheaper interest loans instead?
Crunching numbers for your unique scenario helps determine the savvier path between competing payoff priorities – rates versus liquidity. Think long term.
Closing Thoughts on Credit Card Consolidation Loans
- Run card refinancing calculators using your actual balances and credit profile to validate considerable lifetime savings potential before applying for loans. Ensure total interest costs drop noticeably under new loan terms.
- Prioritize lenders and loan options guaranteeing to immediately address transferring card balances directly. Avoid offers dumping lump sums into your bank account holding responsibility paying original creditors.
- Consider debt counseling services to negotiate existing card obligations before consolidating balances through loans. Many creditors agree to waive interest charges or even forgive portions of principal owed in exchange for documented hardship circumstances. Try arranging alternative payoffs before borrowing anew.
Smart consumers realizesizeable wins consolidating compounding credit card debts under the fixed rates and predictable payment schedules of personal installment loans. Maximizing savings requires upfront financial legwork calculating figures specific to your unique balances and comparing across multiple reputable lending options favored by your credit profile. But once executed deliberately, refinancing high-interest credit card balances unlocks major relief. Your financial future will thank you.
Where can borrowers check credit scores needed for the best card consolidation loan rates?
All consumers should obtain free credit reports and FICO credit scores annually using AnnualCreditReport.com to understand current ratings guiding loan approvals and personalized pricing. Many banks also provide account holders free access to VantageScores.
What payoff deadline should I expect for credit card balances under new consolidation loans?
The best loan products promise clearing your latest credit card statements in full within 5-7 days after loan funding. Read loan terms to confirm cards get paid directly on your behalf, not just receiving lump sum cash without accountable proof balances get addressed by the new lender.
Can I qualify for personal loan rates under 10% with mediocre 650 credit?
While unlikely grabbing rates below 10% with FICO scores under 700 currently, borrowers around 650 FICO these days may still find offers under 15% APR using online lenders and debt consolidation services specializing in fair credit lending. Improvement takes time.
Is transferring credit card balances to a 0% balance transfer card smarter than consolidating to loans?
Sometimes – but ensure you qualify for 0% introductory card offers without balance transfer fees exceeding $200 negating savings. And commit to completely paying transferred balances by the 0% expiry to avoid deferred interest surcharges after 12-15 months! Balance transfer discipline matters.
Which ranks better between paying off cards with savings versus lower rate loans if money gets saved/invested after?
Crunch the numbers! Estimate your safe investment returns in the market versus total loan interest costs. 6-7% market returns may beat financing 5-9% loans. But eliminating debts guaranteed saves over risky returns. Assess your risk tolerance and crunch ROI projections to decide mathematically.