09 Nov How can we refinance $14K in credit card debt?

Q. We want to refinance $14,000 in credit card debt. How can we do that?
— Drowning in it

A. Congratulations on your journey to becoming free of credit card debt.

How you consolidate your debt will depend on how much debt you have overall, your credit score and other factors, such as your payment history.

Consolidating your credit card debt works if the new debt has a lower annual percentage rate (APR) than what you have now, said Betty Thomas, a chartered financial consultant and certified financial planner with Peapack Private Wealth Management in New Providence.

The move could reduce your interest costs, make the payments more manageable and possibly shorten the payoff period, she said.

One option to consider is a debt consolidation loan, also known as a personal loan. It is an opportunity to consolidate the full amount of credit card debt into one loan, Thomas said.

“You would have a fixed monthly payment based on the interest rate and term of the loan,” she said. “At the end of the loan term, the debt would be paid off. This would save money on interest charges.”

Thomas said the average interest rate charged on credit cards is around 16%, so the rate on a consolidation loan should be lower.

It’s important to know that the lender may determine the interest rate by the term of the loan you are requesting and your credit score. Therefore, it is important to know your credit score, she said. The better your credit score, the better the interest rates offered to you.

You can check your scores for free once a year at AnnualCreditReport.com.

Another option is a balance transfer to a credit card which offers an introductory 0% APR.

“These offers are usually short term, such as 6 to 18 months and there could be a balance transfer fee,” Thomas said. “Transferring your debt to a 0% card would give you an opportunity to pay off the debt with no interest.”

When you transfer debt, remember that you can only transfer up to the credit limit offered by the card, she said. If the credit limit isn’t enough to cover the amount you want to refinance, you would have to look for other options for any remaining credit card balance.

“The caveat to these offers is if you are not able to pay off the balance within the introductory period, the interest accrued would be due and any remaining balance would be subject to a higher interest rate,” she said. “Again, you should have a good or excellent credit score when researching this type of offer.”

Email your questions to .

This story was originally published on Nov. 9, 2021.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.