Question about consolidating debt

Pearland, TX · Member since 2015 · 46 posts · 8 votes

I’ve been thinking of ways for my wife and I to quickly get out of the debt we’re in. Right now there are multiple things we owe on. We own our family vehicle out right so my thought was to take a loan out on our vehicle and use the money to pay off the rest of the debt. Our monthly vehicle note would be less than what we are paying now on everything all together, and I’m thinking we would still have some left over we could use to invest or put back down on the vehicle note. I wanted to get others thoughts on this idea.

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Tampa, FL · Member since 2020 · 60 posts · 43 votes

Jordan, I am having a hard time understanding why you’d take out a loan to get out of debt. The smartest thing to do is to attack the “bad debts” - debt on anything that is not an asset but a liability. This could be a boat, a camper trailer, a huge truck, student loans, etc. Your good debts should be paid off after taking on all of your bad debts. I suggest selling things you do not need, or even downgrading on things you can, such as your vehicle.

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
4y
@Jordan Johnson
If you hear people talk about loan constant that is what you were thinking - which is what’s better debt a 20,000 loan paying $500 or a $20,000 paying $200?
If you can consolidate and pay off your debt from getting. Car loan that typically makes sense since car loan rate is lower than your other rates
Next though you need to save save saved
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Rick Pozos
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
4y
Hey @Jordan Johnson I can speak to this since I have been there at various times in my life. Short answer, there is no quick way to get out of debt. Especially if you have not talked about, discussed, planned and agreed about how to get out of this debt. Debt consolidation into 18mo no interest might be a good start.
Once you have a plan, execute.
In addition, if you can wholesale something, put everything into paying down the debt. If you get a bonus at work, put everything into paying down the debt. You will be out in half the time that you have planned. Live way below your means for a set period of time(1 year?).
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Chris Davidson
Real Estate Agent · Boise, ID · Member since 2016 · 1k+ posts · 888 votes
4y
@Jordan Johnson Like others have said it can make sense if the numbers pencil out. But I would add, don't invest any funds in excess of the vehicle note after debt pay down. This is taking you the opposite way of getting out of debt, and just increased your debt. Get the debt paid off and save and invest from a position of strength.
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Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
4y
What debts do you have and what are their interest rates?
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Tampa, FL · Member since 2020 · 60 posts · 43 votes
4y
Jordan, I am having a hard time understanding why you’d take out a loan to get out of debt. The smartest thing to do is to attack the “bad debts” - debt on anything that is not an asset but a liability. This could be a boat, a camper trailer, a huge truck, student loans, etc. Your good debts should be paid off after taking on all of your bad debts. I suggest selling things you do not need, or even downgrading on things you can, such as your vehicle.
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David M.
Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
4y
@Jordan Johnson
Well, I don't think I've heard of taking a loan out on a vehicle... How much is this vehicle worth? how much are your debts? huh?
What are the interest rates on your other debts?
Yes, debt consolidation is a method to work on getting out of debt. Its about trying to lower the effective interest rate you are paying to help you catch up.
I know for many sometimes just getting a personal loan as part of debt consolidation has a lower rate.
However, at the end of day in my opinion its also about spending less, lowering your standard of living (so this course of action is sustainable), and earning more income if possible.
Good luck.
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Peter MckernanBusiness Member
Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
4y
Quote from @Jordan Johnson:

I’ve been thinking of ways for my wife and I to quickly get out of the debt we’re in. Right now there are multiple things we owe on. We own our family vehicle out right so my thought was to take a loan out on our vehicle and use the money to pay off the rest of the debt. Our monthly vehicle note would be less than what we are paying now on everything all together, and I’m thinking we would still have some left over we could use to invest or put back down on the vehicle note. I wanted to get others thoughts on this idea.

I would do a couple of things, my wife and I back in 2018 paid off all the student debt we had (over $100K in 2.5 years). We worked full-time and did a side hustle (selling real estate). We also downgraded cars too instead of holding onto the note for awhile.
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Alicia MarksPro Member
Fort Worth, TX · Member since 2020 · 1k+ posts · 2k+ votes
4y
I agree that a lot of the suggestions would depend on the amounts and rates. I went overbudget on a rehab and used velocity banking strategies to pay it down faster. Also look at 0% options of either opening a new card and moving balances or paying off the one most likely to offer a balance transfer rate to pay it off more quickly.
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William Joel Idleman
Financial Advisor · San Antonio Texas · Member since 2022 · 100 posts · 53 votes
4y
I'm not a huge Davey Ramsey fan but I do like some of his strategies. On the spectrum of Grant Cardone to Dave Ramsey, I'm somewhere in the middle. However, I think this is one of those times to look at the debt snowball strategy. I can't remember the statistics but the success rate of paying off debt vs getting in more debt after consolidating is abysmal. Statistics are not on your side if you choose to consolidate and I prefer to stack the deck in my favor. I've attached a link below on the strategy Dave teaches.

How the Debt Snowball Method Works | RamseySolutions.com
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Joe Garretson
Investor · Castle Rock, CO · Member since 2021 · 79 posts · 104 votes
4y
Some solid advice in this thread. Congrats on taking the first step though and realizing you need to get out of debt now. That's always the hardest step.
Second, you say you've been thinking of ways... does your wife agree on getting out of debt? It'll be exponentially harder if this is only you wanting to accomplish this. So if you haven't had that conversation, you need to do that now and show what the debt is doing to your long term financial goals. I was a debt-aholic until it nearly cost me my marriage in 2018. My wife and I had some hard conversations and have eliminated all consumer debt and have stayed debt free.
Some options for you after you and your wife are on the same page - depending on the amount of debt, you can sell the car you mentioned, buy a cheaper car or use a bike/public transportation/walk and use the proceeds from that sale to get out of debt. That's a fast way to make a huge dent. Used car values are insane right now so you could win with this.
Another option for fast debt relief is to empty any investment accounts and/or 401k to pay it off. Lots of tax implications and longer term financial issues to consider but it is a fast way to eliminate debt.
The best path forward and probably the most sustainable is to figure out what's causing the debt, like overspending, and attack that. You likely have a spending problem, not an income problem. Fix the spending and use any and all funds to pay off the highest interest rate debt first. Change your lifestyle and you'll win long term.
Best of luck on getting out of debt. It's a huge weight lifted from your shoulders.
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Nelcol L Philip
New York, NY · Member since 2018 · 8 posts · 2 votes
4y
Congratulation on taking the next step. As a financial coach and real estate investor, You need to look at your entire portfolio. Debt to income ratio and understand what is driving your numbers in the wrong direction so you would reoccur once resolved. No more bandaids. Let's cure the damage.
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Chris Szepessy
Catskill, NY · Member since 2018 · 636 posts · 668 votes
4y
The problem with consolidating debt/borrowing your way out of debt is that it makes you feel like you've accomplished something when in reality you just moved the debt around..and you fall back into the same spending habits rather quickly. I think Dave Ramsey's snowball method will be the best option for you.
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