"I should not have got these cards": With $45,000 in credit card debt and loans, should I let some cards go to collections, or is there a better solution?

Hey Money Minder,

So, I’m 31 years old, making around $50K a year, but I’ve got about $25K in credit card debt and $20K in auto loan debt. Some of those cards are spiraling out of control, and I’m thinking of just letting a few go to collections instead of struggling to pay them off. I messed up big time with these cards, especially during the lockdown when things were tough.

Here’s the breakdown:

Discover 1 – 26.24% – $8000
Discover 2 – 28.24% – $4242
Citibank – 29.24% – $1500
Venmo – 29.24% – $1800
Amazon – 29.99% – $300
CFNA – 28.8% – $1000
Fidelity – 18.74% – $500
BestEgg – 27.49% – $1000
PayPal – 29.24% – $1000
CapitalOne Quicksilver – 29.74% – $815
CapitalOne SavorOne – 30.74% – $500
Credit Union – 18% – $2000
Personal Loan – 15.74% – $530
2022 Honda CRV Hybrid – 3.9% – $24000

Debt consolidation seems sketchy, and the interest rates are crazy high. Is it even worth it? What about non-profit debt consolidation? Should I just let the cards with the highest balances go to collections? Or should I consider filing for bankruptcy?

Catch you later,

Response from THE MONEY MINDER:

"Hello There,"

I understand the challenging situation you are facing with your current financial obligations and debts. It’s commendable that you are seeking guidance on how to manage these debts effectively. Considering your detailed breakdown of credit card and auto loan debts, it’s clear that the high-interest rates on your credit cards are adding to your financial burden.

Firstly, I would advise against letting any of your cards go to collections, as this would have a significant negative impact on your credit score and financial future. Instead, I recommend exploring debt consolidation options that offer lower interest rates than your current credit cards. While some debt consolidation services may come with fees or higher interest rates, there are legitimate institutions that can help you consolidate your debts into a single, more manageable payment plan.

Additionally, bankruptcy should be considered as a last resort, as it has long-term consequences on your credit history and financial standing. It’s essential to exhaust all other options before considering bankruptcy.

In terms of your auto loan, the interest rate seems reasonable compared to the high rates on your credit cards. However, if you believe refinancing the auto loan at a lower rate is feasible, you may explore that option to reduce your overall debt burden.

Lastly, creating a realistic budget and cutting back on unnecessary expenses can help you allocate more funds towards paying off your debts. It may be challenging, but with determination and discipline, you can work towards becoming debt-free.

Remember, seeking the assistance of a financial advisor or credit counselor can provide you with personalized guidance tailored to your specific situation. Stay focused on your financial goals and take small steps towards reducing your debts. You have the ability to overcome this challenging situation and improve your financial well-being.

THE MONEY MINDER