Credit Card Refinancing Vs Debt Consolidation: Which Option is Better for Your Business?

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Although it appears like they mean the same thing, credit card refinancing and debt consolidation are completely different concepts. As a small business owner who wants to pay off your business credits, you'll eventually have to choose one of the options.

Understanding the differences between these concepts, the implications of each, and the peculiarities of your business’ situation will help you make the best choice for your business credit repayment.

So, the big question remains, “Which should I go for: a credit card refinancing loan or a debt consolidation loan?”

Before guiding you to make the best choice for your business, let's take a quick look at each of them.

Credit Card Refinancing and Debt Consolidation: What Do They Even Mean?

These are special arrangements you can get into as a business owner who wants to pay off the business credits you have so far accessed. They have different modes of operation and suit specific scenarios.

Credit Card Refinancing

Credit card refinancing is simply the process of transferring credit balance from one card to another. In essence, when you’ve done this, your debt still remains, but it's transferred to another card.

Some business owners go for this option to enjoy continued access to business credits. Also, credit card refinancing comes with lower interest rates.

Advantages of Credit Card Refinancing

• Credit card refinancing is a faster process, compared to debt consolidation. With everything in place, you can complete your application online in a matter of minutes - or hours, at worst. Speed and convenience make credit refinancing a better option than debt consolidation, which usually takes a much longer time.
   
• Many business owners opt for credit card refinancing because of the lower interest rates that come with it. With lower interest rates, you save more money on your credit transactions. This translates to some extra cash for more pressing business needs.

Some credit refinancing products incentivise business owners with the temporary 0% introductory rate offer. Here, credit card lenders offer an interest-free credit line for a specified period, usually anywhere between 30 and 90 days.  

• Refinancing offers access to future credits.  When you pay off the credit on a refinanced account, the cycle begins again and you can borrow that amount of money again in the future.  

However, you should be careful of the temptation to approach credit card refinancing as a method of stowing money away for the future. Your refinancing account isn’t a savings or an investment account. Bearing this in mind will help you make the best decision for your business.

Debt consolidation

Debt consolidation, as the name implies, is the process of transferring the credit balance on multiple cards to a single place. Usually, business owners move over their smaller business credits to an account with a high credit limit. The essence of this is to help the entrepreneur better keep tabs on their credit history.

Debt consolidation serves well when you’re looking to eliminate credit card debt and lower your loan repayment. This option allows you to do that because by the end of a term, you would have paid off every debt on the loan account. A term is usually a much longer time than a refinancing cycle.

 

For instance, if you have multiple credit card debts and several CreditNinja loans in PA, debt consolidation can be a great option as it can lower your monthly loan repayments but lengthen the loan tenure. Nonetheless, it's essential to keep in mind that the terms of debt consolidation may differ depending on the lender. 

 

Advantages of Debt Consolidation

• One of the biggest advantages of debt consolidation is that you get fixed interest rates if it turns out successful. That way, you know from the start how much interest you’re going to pay when you start offsetting the loans.
   
• If you have a healthy business card history, the interest rates you'll pay on your consolidated account will be lower than what you get on your personal and business credit accounts.
   
• With this type of credit account, you pay a fixed sum monthly. This means that your monthly payment will remain the same until you pay off the loan. Also, the payment structure is less sporadic because you already know when you'll fully pay off the loan.

Considerations for making a final decision

Before making a final decision to go with either of the options, here are a few things to consider:

•  Time involved

The truth is this: credit refinancing remains the better option if you’re on a tight leash with respect to time. If you want the process completed quickly, without having to go through a lot of hassles, credit refinancing is your best bet.

• Interest rate

If you desire to reduce the amount of interest you pay on credits, then credit refinancing is a better option. However, it's important to choose the right lender. That way, you don't get carried away with the 0% introductory interest rate offer, only to get sucked into the black hole of paying ridiculous interest rates when the offer expires. 

• Amount of debt you’re to pay

If you’re already neck-deep in debt, you need an option that makes repayment more flexible. The option should also eliminate the extra sting of steep interest rates. If, after careful analysis, you discover that your credit card debt is too much, you may want to consider refinancing.