Advice...

[Slavko]

Looking for some financial advice on this situation.


The scenario: selling my car, hoping to get 15-16k from it. Plan on buying a used car for around 6 or 7k.


Should I...
1)Put all 15-16k towards a credit card balance of 20k @11.9% and finance my car at 5-7%.
or
2)Pay cash for my car and pay the remainder of my funds towards the above credit card.


Was initially leaning towards option 2 as this would lessen my monthly debt and allow my to direct more towards the debt. But option 1 is also attractive as it will make a big dent on my highest debt.


Thx for your help .

[SusanTiner]

To me it makes more sense to go with option #1 so the outstanding debt is at a lower interest rate.

[SilverGlow]

Option 1 is a lot less fun, but it is the best option.

Tough Love yourself...it hurts but it's best.

[corporate]

I would also go for option one, since having debt with high interest rates are not very favorable and something I would avoid to every price.

[Dr Dean]

Would have to disagree with the other posts for two reasons:

• Getting into debt is why you have these problems-so why not start today with buying something without debt.

• Getting debt free is about more than just the math-it is mostly mindset-so driving a car that is yours free and clear and eliminating a good portion of your credit card debt will put you in a great position.

So I would pay cash for the car and knock down the credit card debt with the left over cash. Would then use this momentum to eliminate the credit card debt completely-then don't go back...

Congrats on your wise thinking, and either way you are so much better off than before.

[BuildMyBudget]

I understand your point of view Dr. Dean, but I think regardless of the principle it makes mathematical sense to use option 1. If you're going to be stuck with debt either way, you might as well have less at a lower rate. No?

[trustno1]

First of all, you did not acquire $20K in credit card debt overnight. You also allude to that being your "highest debt", which infers it is not your only outstanding debt. Expecting to finance a car @ 5-7% interest with your credit file, will require a miracle.

Anyone that views financing as being "attractive", has no business carrying credit cards...it is like they are like a carrying a gun...nothing "good" ever results from it. lol

Selling "assets" to recover from debt, should be a decision of last resort, not a "viable tool" used in resolving financial issues.

Any option including the word "finance", regarding your future purchases, is best avoided.

Comparing something "bad", with something "worse", is poor logic.

Buy the lowest priced vehicle capable of transporting you to work without facing maintenence repairs. Pay off your debt, and save money to purchase items you want. Financing is just another term for "I can not afford to buy this".

Good Luck