‘The best solution is to just consolidate our loan/credit card debt into one’: My spouse and I are drowning in $28,000 of debt. How can we simplify our payments and save money?

Hi Money Minder,

So, here’s the deal with our credit cards and loans:

My Credit Cards:
Apple Card: $2900 (I’m paying $100)
Capital One Walmart: $2900 ($100 payment)
Discover: $2000 ($110 payment)
Upgrade: $1200 ($115 payment)
Capitol One Quicksilver: $500 ($25 payment)
Capital One Platinum: $300 ($25 payment)
Credit one: $300 ($30 payment)
Citi: $470 ($35 payment)

Wife’s Finances:
Loan #1: $8218 ($205 payment)
Loan #2: $1874 ($240 payment)
Discover credit card: $7436 ($150 payment)

So, total debt we’re dealing with: around $28,000. And our monthly payments add up to about $1140.

Just so you know, there are a few other expenses like $750 for rent, and I’m handling a $620 car payment. Plus, we’ve got all the usual stuff like groceries, utilities, and wants/needs.

Here’s the real question – should we consolidate all this debt into one? I can get a consolidation loan from my bank at 10% interest for 72 months. That would drop our monthly payment to around $530, instead of the $1140 we’re shelling out right now. That’s like saving $600 every month!

So, what do you think? Is this the smartest move for us?

Cheers, Debt Crusher

Response from THE MONEY MINDER:

Hello There,

While consolidating your loan and credit card debt into one payment through a consolidation loan may seem like a tempting solution, it’s essential to carefully consider all aspects before proceeding. Yes, consolidating your debts may reduce your monthly payments significantly and provide some financial breathing room, but it also comes with its own set of pros and cons.

Firstly, consolidating your debts can simplify your financial obligations by combining multiple payments into one. This not only streamlines your monthly budgeting but also helps you stay organized and avoid missing any payments. Additionally, if you can secure a lower interest rate on the consolidation loan than what you are currently paying on your credit cards and loans, it may save you money in the long run.

However, it’s crucial to assess whether you can commit to making the monthly payments on the consolidation loan without accruing additional debt. While your monthly payments may decrease, extending the repayment period to 72 months could result in paying more interest over time. You must also evaluate if you have addressed the root cause of your debt accumulation to prevent falling into the same cycle again.

Before making a decision, take a closer look at your current financial situation, including your income, expenses, and future financial goals. Consider creating a detailed budget to understand where your money is going and identify areas where you can cut back to allocate more towards paying off your debt. It may be beneficial to explore other debt repayment strategies, such as the debt avalanche or debt snowball methods, to tackle your debts strategically.

Ultimately, the right approach will depend on your individual circumstances and financial priorities. If you decide to proceed with debt consolidation, ensure that you are aware of all the terms and conditions of the consolidation loan and have a solid plan in place to manage your finances prudently moving forward. All the best from THE MONEY MINDER.