• refinance

Right choice; Refinance your vacation debt

When you refinance old debt which stems from vacationing, you benefit in two specific ways. First through lower interest rates, which in turn saves you money. Secondly, once you “pool” your smaller loans and financial obligations into one basket it will also become easier to keep track of your outstanding obligations.

A quick search online returns multiple results for banks and companies which offer refinancing. The question is which offer makes the most financial sense when interpreted through the lense of economic frugality. Many decide to refinance their old travel debt in order to rid themselves of burdening credit card liabilities, or payday loans.
Compared to a traditional consumer loan, annual percentage rates can be close to twice as high on credit card balances that were used to pay for a vacation abroad. For those of us who struggle with high debt loads, substantial benefits can be felt from refinancing.

Starting point. The first step you need to undertake, is to get a full overview of your financial situation. That includes all current financial liabilities, as well as which APR’s you’re currently paying on your debt. Consider pooling all liabilities into the new refinanced loan (including debt which stems from vacations etc.)

Also make sure to note down the downpayment time, along with any monthly fees you’re paying for the maintenance of the debt. An idea is to create a spreadsheet, with formulas that automatically convert each sum.

Laws relating to fees on refinance loans vary by each country. In Norway for example, it is referred to as “termingebyr”, and typically costs anywhere from 30 to 50 kroners per month according to refinancing site refinansiere.net. That’s the equivalent of roughly 2 to 4 british pound sterling.

Comparing offers. Once the overview is in place, you can begin to compare possible refinancing agreements and see which one is best for you. You will find several web sites that compare consumer loans, which in turn can be used to refinance your travel and credit card debt.
However, there’s a catch 22 to this process. Banks decide their APR offers based on a so called credit worthiness check, in which they study your economic data. In other words, an advertised interest rate may not be what you end up paying the bank when you refinance.

Make the right choice. 
Once you have found a loan which suits your needs, it’s imperative that you spend the money the proper way. As we pointed out earlier, these loans are equal to consumer loans, with the difference being that you save money in the form of lower interest rates. Some banks will pay out the new loan, without any strings attached.
Therefore, you must resist the temptation to use the new loan in any other way than that which includes paying off your credit cards, travel loans o. Once finished, you’ll have one loan and creditor to deal with, along with a better interest rate.

How refinancing is accomplished. Refinancing of travel and vacation loans can be accomplished in different ways. Besides using a new consumer loan to wipe out the expensive debt, some decide to expand the credit line on their mortgage. Thus, their new debt has a lower interest rate and can be used to pay down other liabilities.

For those who can draw money from a mortgage credit line, it will usually be the best solution. As mentioned, the second opportunity is to apply for an unsecured consumer loan. Unsecured simply means that the bank won’t require collateral from you in order to pay out the loan. Some individuals are able to refinance through putting up collateral with the value of their vehicles or other tangible assets, but this is relatively uncommon.
These days, people even decide to refinance their student loans, as there can be money to save through cuts in the interest rates.

How to pay down your debt. In order to benefit from the refinancing of old credit card and travel debt, you will need to pay down your loans at the same pace as you did before. Think of it this way:
Once you refinance, your interest rates shrinks, thus a larger share of your monthly payments get directed towards the down payment portion and not the interest rates. In other words you will be able to wipe out your loan at a faster pace, but only if you stick to the original down payment plan.

About the Author:

Philip A. Nortvedt
I use to rent a studio in an Italian village and pop up to watch the history and architecture for inspiration. My favourite bar is next to the central Piazza, they do surprisingly fruit drinks and delicious pizza. One day I will tell you the exact location

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