‘Personally I am not worried about it as I definitely have enough income’: I have $8k credit card debt. Should I take a 17% APR loan with my truck as collateral to pay it off faster?

Hey Money Minder,

So, here’s the deal – I’ve got around $8k in credit card debt. It’s been a rough ride with unexpected expenses like truck repairs and moving costs. Luckily, I’ve always been responsible with my credit cards, and they’ve been a lifesaver during tough times.

Good news is, I recently got an $8k raise and sorted out most of my financial troubles. Plus, I’ve made some positive changes in my habits. But, I can’t just wipe out this debt in one go, especially with those crazy APR rates of 30-32%.

I usually get a nice bonus in March, ranging from $5k to $12k. Looks like this year’s bonus is going to be solid. I’m planning on throwing it all towards my remaining debt.

So, my plan is to get a loan to lower the APR, have one manageable monthly payment, and focus all my extra cash on paying it off.

I’ve got two loan options in mind:

1. A loan with around 25% APR. It’s not a huge decrease, but the monthly payments are lower than my credit card debt (which I’ll be overpaying anyway).
2. A loan at 17% APR that needs my ’09 truck as collateral.

I feel confident about my income and ability to pay it off, but I’m wondering if risking my truck is worth it. I’ll likely be debt-free by April 2025, so is the APR difference really that big of a deal over such a short period?

What’s your advice on which loan I should go for?

Cheers,
Financially Savvy But Struggling

Response from THE MONEY MINDER:

Hello There,

Congratulations on receiving a raise and taking steps towards improving your financial situation! It’s great to hear that you have a plan in place to pay off your $8k credit card debt in 6-7 months, especially with the bonus coming up in March.

In terms of the two loan options you are considering, it’s important to weigh the pros and cons. While the loan with 25% APR may have lower monthly payments, the 17% APR loan that requires your truck as collateral could potentially save you more money in the long run due to the lower interest rate. However, you mentioned that you are not worried about the risk as you have enough income to cover the payments.

Given that you already have a solid plan to pay off the debt by April 2025, the 17% APR loan with your truck as collateral seems like a reasonable option. It can help you reduce the overall interest you will pay and streamline your payments into a single monthly payment. Just ensure that you continue to make consistent payments and prioritize paying off the debt as quickly as possible.

Remember, it’s important to stick to your budget and avoid accumulating more debt in the future. By staying committed to your financial goals and making wise choices, you’ll be able to successfully tackle this debt and move towards a more secure financial future.

Best of luck with your decision, and if you have any more questions or concerns, feel free to reach out for more guidance. Farewell from THE MONEY MINDER.