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How to Refinance Short Term Debt

by Contributing Writer

Overview

Short-term debt is classified as debt that can be paid off in 12 months or less. Typically, short-term debt for most consumers is mainly in the form of credit cards. Short-term debt may also be student loans due in the next 23 months, revolving credit lines from stores or pay-day loans. Short-term debt is problematic because monthly payments almost always go to paying the interest on the debt.

Step 1

Consider if refinancing is a viable option. The best option is always to pay off your debt. If you are in danger of defaulting on a loan or harming your credit score, refinancing can be the "next best" course of action.
Step 2

Consolidate your debt. The loan allows you to refinance all short term debt into one loan. These loans loans are good because they are almost always payable at a lesser interest rate than credit cards and other revolving debt. Consolidation is a good idea for people who do not own a home.
Step 3

Consider a home equity loan. This loan allows you to use the equity of your home to pay off short-term debt. These loans generally are available at a higher interest than a home mortgage but still lower than many other short term loans. One benefit of these loans is they often offer tax benefits to the borrower. However, these loans can become dangerous because your home is security for any future defaults.
Step 4

Transfer balances from high interest credit cards to lower interest cards. If your credit score is fairly good, you may be able to acquire a card with an introductory zero percent interest rate on balance transfers. This allows you to pay off the debts' principle rather than paying interest.
Step 5

Make monthly payments on time. The purpose of refinancing is to help you pay off your debt more easily without a negative impact on your credit score. However, late or missed payments will lead to a lower credit score and will render the refinancing useless.

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Refinancing does not mean that your debts do not need to be paid. It is merely a way to help you pay them off more easily without a negative impact on your credit score or personal finances.
Refinancing does not mean that your debts do not need to be paid. It is merely a way to help you pay them off more easily without a negative impact on your credit score or personal finances.