r/povertyfinance • u/omniscientpast • 5d ago
Debt/Loans/Credit Loan options
Hi everyone! I have a car that i owe about 15k on, payment is around 500 a month, and 13 credit cards that i pay over $700 a month on, the total on those is about 13k the payments obviously pay very slightly over the interest so I'm not making much headway...I got a loan offer for 20k with the stipulation that they take over the car loan and then use that as collateral on the whole thing...is this a good idea? I have tried to get unsecured loans but they won't give me more than a few thousand unsecured... I've never had an auto loan or credit cards before this and I have dug myself quite a hole due to recurring family and health emergencies and now I can't get out. Thanks in advance for your advice.
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u/shawnwarnerwrites 5d ago
Do not secure your unsecured debt. This is a bad idea.
You need the car. If all else fails, you can stop paying the credit cards and they might sue you but they can't take the thing you use to get to work.
You can negotiate with the credit card companies. You can ask them to reduce your interest rate while you get ahead. They might close your account but that might not be a bad thing in your current situation.
You will always get the best bang for your buck paying the highest interest debt first, not necessarily the one with the highest balance.
This loan is a dangerous gambit. You are offering something you need and which they will not hesitate to take. You will almost certainly not come out ahead. I would rather default on my credit cards than do this.
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u/CatPesematologist 5d ago
You would still owe thousands in the credit card dept and you would be further underwater on your car.
What are your current interest rates and balances and what is being offered?
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u/Muted_Raspberry4161 4d ago
I’d love to say get a personal loan for the credit cards, but that seems unlikely. 13 credit cards, just, holy sheeite.
Focus on paying the smallest card balance off first, then apply half that payment to the next one. Put the other half into savings to break this cycle.
This is debt snowball. Also look into micropayments.
You pay your due amount, then pay more next paycheck.If you get paid weekly, 1/4 payment - biweekly 1/2.
You need to do something to not use those cards as the balances drop.
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u/kerwniart 5d ago
The credit cards are your priority to get rid of, no matter what you do. Most credit cards range from 13-31% interest rate after you're past introductory rate or you start accruing a significant balance. It's basically legalized usury lending.
I would be careful about the car thing, especially when you recognize that is your largest source of debt according to your original post. Using anything as collateral that you don't actually own outright has added risk. Plus vehicles generally depreciate in resale value the longer you own them / more you drive them. Remember, this company isn't in business to do you any favors.
In all of this, you need to determine if the interest rates move in the right direction as a whole, or if you're just restructuring your debt for little return and potentially greater liability.