Braidwood Capital has begun flooding the market with debt consolidation and credit card relief in the mail. The problem is that the terms and conditions are at the very least confusing, and possibly even suspect. The interest rates are so low that you would have to have near-perfect credit to be approved for one of their offers. Best 2019 Reviews, the personal finance review site, has been following Braidwood Capital, Tiffany Funding, Nickel Advisors, Coral Funding, Neon Funding, Ladder Advisors (also known as Carina Advisors, Corey Advisors, Pennon Partners, Jayhawk Advisors, Clay Advisors, Colony Associates, and Pine Advisors, etc.).
The coronavirus pandemic brought many surprising stories. Financially, the historic low in prime rate was one of the biggest news during the crisis. The prime rate is the percentage that Fed costs on providing loans to its clients. The current prime rate is 3.25%. Moreover, this dramatic decrease in the rate might be here to stay for a while.
In light of the current Federal cuts, many people are considering refinancing their credit cards. If you’re one of them, then we’re here to help you make the decision. Let’s take a closer look at what this Fed cut implies and how it could be beneficial for your situation.
When does refinancing credit cards make sense?
Most credit cards offer variable Annual Percentage Rates (APR). The APR determines the annual interest rate that is charged on your credit card loans over the year. Most credit card companies decide the APR for a customer based on the prime rate as well as the customer’s creditworthiness.
The change in your creditworthiness can make significant changes to your APR. If the customer has an excellent credit score, they are currently charged an APR averaging 14.5%. Companies usually offer 26.2% APR to customers with an average or fair credit scores.
However, once you’ve signed the loan, your APR remains the same regardless of any improvement in your credit score. Therefore, in those cases, refinancing your credit card would be an excellent option.
Is it a good time to refinance your credit cards?
The most convenient method to reduce your monthly credit card payments is by contacting your bank or credit company and requesting a lower interest rate. It is easier to convince a lender for the rate reduction if you’ve had a long history with them.
However, even if you’re not a long-term client, you still need to contact your credit card provider first. You’ll most likely have to discuss your financial health, credit usage, payment history, and other factors when convincing your bank why you deserve to receive a lower APR.
If you’re a new user of the credit card, it might be challenging to negotiate a lower interest rate with your bank right away. However, there are other options for refinancing. The next best option would be a balance transfer. Through this method, you can transfer your existing credit card balance to another card that offers lower interest rates. That way, you’ll be able to pay off the debt in much less time and overall cost.
What is the best method of refinancing credit cards?
Balance transfer cards are the most widely-chosen option when it comes to combining all credit card loans and then paying them off at a lower interest rate. Most balance transfer cards offer an introductory period of 0% APR that lasts sometime between 3 and 18 months.
This option is ideal for you if you think you’ll be able to pay off all your debt within the introductory period. Because as soon as the 0% APR period ends, the annual percentage rate on these transfer cards can go as high up as 16.5%. This rate isn’t any better than other credit cards.
That’s why you should only go through with the balance transfer when you’re sure you’ll pay off your debt during the introductory period.
Everything you need to know about refinancing credit cards
Consolidating and refinancing can seem like a daunting process and often very confusing. So, we’re going to answer a few of your burning questions to clear out the confusion surrounding refinancing credit cards.
1. Would consolidating your credit cards damage your score?
Consolidating all your credit card dues into a single payment would raise your credit score. However,this rise is only short-term and temporary. It happens because of a high credit utilization rate on hybrid and balance transfer credit cards.
Once you start paying your balance, your credit score will rise again with time. Moreover, when you start making on-time payments, it would benefit you significantly.
2. Is there any difference between refinancing and debt consolidation?
Yes, they are different. Debt consolidation functions by combining multiple of your balance into a single monthly payment. However, with debt financing, you change the terms of your loans and secure a lower interest rate on your loan.
Balance transfer cards offer the same refinancing benefits by offering you to pay off your debt at a lower interest rate and reduced term.
3. Can you use personal loans to pay off your credit card debt?
Yes, you can definitely apply for personal loans to use them for paying off your credit card debt. Sometimes, personal loans have even lower APR than balance transfer cards.
4. Should you refinance your credit cards?
If you’re struggling to pay your monthly dues, then refinancing is a good option. It’s also quite convenient because you can sign up for a balance transfer card and get on the 0% introductory APR to pay off your balances.
Refinancing is a good option in most scenarios, especially if you can’t pay your dues with your current rate. With the Fed rate cut, it’s even more feasible to go forward with refinancing.