The Payoff Series: Refinancing: Where, When, How?

payoff series

The Payoff Series: Refinancing: Where, When, How?

Welcome to Part Two of a 6-part series I’m doing on personal loans, credit card debt, and refinancing – the Payoff Series. If you’re new here, go back and check out Part One!

Refinancing credit card debt means paying off your current debt-load with another loan. Refinancing is different than debt negotiation. In debt negotiation or debt settlement, you work with your lenders to reduce the total principal you owe by offering a fast, lump-sum payment. Refinancing means you will still have monthly payments, but they will be to a different lender. The ultimate goal in refinancing is to secure a better debt situation than the one you are currently in. To gain those benefits, you must enter the process carefully.

Step 1: Figure Out the Details of Your Debt

How much debt do you really have? Do you owe on a car, an appliance, or student loans? Take an inventory of all of your debt, including interest rates and minimum monthly payments. Now, depending on that information, make a list of which debt ought to be refinanced (a.k.a. the high-interest debt). This is likely going to be your credit card(s).

Step 2: Determine What You Can Pay

Budgeting is key to making any credit card debt refinancing work in the long run. Use at least six months of bills to effectively budget all of your income and spending. Determine where you can make cuts in order to pay off the highest possible amount each month. Once you have this number, determine how long it will take you to pay off your existing debt if no interest were applied. Next, consider how long it will take you with a given range of interest rates. For example, use 6%, 10% and 12% interest over 3, 5 and 10 years. What would your monthly payments be? This will help show you what interest rate you should seek.

Step 3: Read the Fine Print

Paying off your current debt in one lump sum may come with penalties. These penalties should be expressed in your initial credit card contract. Speak with your current lender to determine if there are any fees or penalties that apply in your case. These fees will be part of your expense in refinancing your credit card debt.

Step 4: Online Dating – The Better Lender Version!

Based on the budget you worked out in Step 2 and the fees you will pay from Step 3, look for an appropriate lender. You may want to start with online lenders because they provide fast quotes and can often do so without dinging your credit score (look for lenders that offer a “soft credit check”. Online lenders may also be able to offer you a better interest rate because they specialize in loans used to refinance debt. Lastly, check online reviews of the companies you are interested in to make sure you actually want to do business with them. I found this process to be pretty easy, and it’s what lead me to the namesake of this series, Payoff. My initial search was just using Google, so I can tell you that there are A LOT of options out there.

Step 5: Put It All Together (& Read Some More Fine Print)

Remember: your interest rate is not the only factor in securing a good loan. You want to make sure there are not excessive fees and penalties for late payments or paying off the debt early. Also check what the origination fee of the loan will be – a fee charged by a lender on entering into a loan agreement to cover the cost of processing the loan. This will often be a small percentage of the loan amount you are requesting, so make sure you factor this amount into your payment strategy.

For me, Payoff was the best choice by far. They had the best interest rate for me, let me check my ability to refinance without hurting my credit score, and offered the loan amount I needed. Plus, their website comes with an entire site devoted to increasing financial wellness, which I appreciated. Refinancing can be a great help in paying off debt, but it’s not a permanent solution. If you pay off your credit card with a personal loan, and then keep using the card, you’re just going to end up with twice the debt. Make sure you fix your budget/income/shopping problem before trying to refinance debt to help pay it off.


In Part Three, I will be showing you just how refinancing via a personal loan works with numbers from my own debt situation. I will also be comparing those numbers with what I would have paid had I tried to tackle my credit card debt on my own.


  1. In business, I use the zero percent credit cards and trade them around for small loans $1,500-$5,000, Each time it only cost $40-60 to take out the money for about a year. Discipline is the key. Treat it like a loan and pay it! No one wants to get caught with an 18% interest loan!

    I agree with shopping around and finding the best deal. And if you are already in a “long term relationship” with a card they may make you a better deal. Or over look some of you faults because they know your habits.

  2. Great explanation, especially about reading the fine print. I never thought about whether companies could do a soft or hard check when it comes to refinancing. Thanks for the enlightenment.

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