I'm a recent graduate, working full time (started in January). I have an average of 21.318% APR across 5 credit cards with a debt totaling $11,137, at $302 monthly min.

  • CC #1: $2493 at 13.4%, $62 monthly min
  • CC #2: $1289 at 17.4%, $26 monthly min
  • CC #3: $5183 at 27%, $169 monthly min
  • CC #4: $496 at 22.8%, $20 monthly min
  • CC #5: $1126 at 25.99%, $25 monthly min

A few days ago I went to Wells Fargo to apply for a Debt Consolidation Loan and their terms are $11,523 (think they see a higher amount I owe?) at 21.755% interest for 60 months. minimum of $320 per month.

Also, 1.5 months ago I got myself a new car (2015 Mustang GT :) ), that's $33650.07 total, 5.79% APR, at $559.28 monthly, 72 months.

My income is $57,717, and with other monthly bills and a set amount for food/other, I'm pretty much dead even in income to expenses. So technically I can make it by. My wife will soon be able to pay half the monthly rent, so that's $550 extra per month for me.

My credit score is around 680-700.

My questions is pretty much: is this debt consolidation deal worth it? Should I just trade down my car? or both?

According to the account statements for my CC's, the payoff at minimums will be between 130 months to 228 months, and the loan will be 60 months. so although the APR is about the same, having a shorter/set timeframe to getting rid of my debt is nice. I know I need to close most of these cards and not use them to avoid getting into the same situation.

I can trade down my car for a $10k-$15k car and hopefully the difference in what my car is worth and the payoff amount (my car is worth about $28k on KBB) will be tacked on to this new car and with at least an OK apr, since I only had this car for about 1.5 months. I'm hoping for around $350 monthly or less with a cheaper car.

Or both? will doing a debt consolidation show up to the car dealership and significantly affect my new car app if I do both within a week span?

  • 6
    Please consider your finances on fire and treat appropriately. Cut your credit cards, work more and use all available income to pay down debt. I'd have a goal to be done with credit card debt in a year, and then be acutally done with it in 10 months.
    – Pete B.
    Commented Jun 21, 2016 at 19:17
  • @Pete B., yeah I was more than likely going to cut my credit cards or at least do something with them that'll remove any temptation to use them.
    – AzNjoE
    Commented Jun 21, 2016 at 19:22
  • 2
    Cut them, burn them, shread them. Close the accounts. Then find $1000 per month even if that means selling your body down at the wharf. Use that to pay off your credit cards. You will be done in 10 months or less.
    – Pete B.
    Commented Jun 21, 2016 at 19:26
  • 1
    May I ask... how did you manage to get $11k in credit card debt so early? I've been in college for 6 years and only have one card with a $300 limit that my bank won't increase (probably due to my $60k of loan debt). Commented Jun 22, 2016 at 0:03
  • 1
    I've never paid more than 1/100th of my annual income, for a car. It's quite incredible what most people spend on cars. The richest man I ever knew had a 20 yr old car worth maybe $600 for his wife to drive the kids to school (i.e., one of the most expensive private schools on Earth) and no car for himself.
    – Fattie
    Commented Jun 23, 2016 at 16:09

2 Answers 2


I would like to correct a little of the math in your question, and then I will talk about my recommendations to you.

First, the average interest rate of your credit cards is 22.32%, when you take it as a whole. The average of the rates needs to be weighted by how much you owe at each rate.

Second, I don't get the same total when I add up the credit card debts as you did. For the rest of this answer, I'll assume that your total is correct and your individual amounts are a little off.

Third, the numbers that you see on your credit card statements for how long it will take to pay off the debt by paying the minimum payment are misleading, if you are committed to paying off all your debt. The reason is that once you get one of the credit cards paid off, you can take the money you were sending to that credit card each month and use it to start paying extra on another credit card. You keep doing that until you only have one credit card left, and all $302 you are currently sending to all your credit cards goes to the one that is left. (This is popularly called a "debt snowball," because your payments build together and get bigger as you eliminate individual debts.) If you do this, you would be done paying all five of your credit cards ($11137) paying no more than $302 a month in 63 months.


If I were you, I would not take this debt consolidation loan. You have gained next to nothing by taking it. (The rate and length of term are about the same as what you are paying now.) Instead, I recommend that you stop using the credit cards altogether and pay them off individually. As I described above, when your first card is paid in full, take the money you were sending to that card each month and send it to one of your other cards, until they are gone.

This interest rate is ridiculously high, and needs to be eliminated as soon as possible. It is time to start treating this like an emergency and paying this debt as quickly as you can. Look for ways you can scrape together extra money, either by earning more, spending less, or selling things you don't need, and send every extra penny to the credit cards. Every month you take off this debt is saving you quite a bit. If you can double your payment ($600 per month), you'll be done with the credit card debt in less than 2 years.

Budgeting is the key to controlling your finances, purposefully eliminating waste and finding the extra money you need to pay off the debt.

At this point, I probably don't need to tell you that the purchase of this car was an incredible mistake. Instead of purchasing the car and committing yourself to a $560 monthly payment, if you had instead sent that $560 to the credit cards, you would be done with your credit cards in 15 months. Instead, you've added $33k to your debt, and after the first month you've lost $5k of car value. (In my world, that $5k buys a perfectly usable car by itself.) Because the new car loan is keeping you from paying off your credit cards, it is effectively costing you much more than just the 5.79% interest rate that you saw on the paperwork.

I'm not sure what to tell you to do about the car. Trading your car in for something else generally gets you a bad deal, but it is worth looking into; since you are already in a very bad situation, the trade in might result in an improvement. However, your best option is probably to sell the car at a loss, get a personal loan for the $5k difference, and then scrape together enough cash to buy a functional used car without an additional loan. Take a look at multiple options; you want the one that results in the least debt and lowest monthly obligations.

  • yeah my totals are a bit off, probably since i rounded them to nearest dollar. But I didn't think of the fact that the CCs with a lower debt will be paid off soon and those payments should be used towards the others. So based on that, I agree its not worth it to do the debt consolidation loan, at least at the terms given. I'll probably just trade down my car, depending on the APR / monthly they offer.
    – AzNjoE
    Commented Jun 21, 2016 at 19:26
  • 4
    Link for the snowball method explained: Five Steps to Get Out of Debt in Record Time: The DOLP Method
    – Ross
    Commented Jun 21, 2016 at 19:45
  • Any method that deviates from "highest interest first" is (strictly speaking) suboptimal for minimizing costs from interest... Why do we need the DOLP method?
    – Chris
    Commented Jun 23, 2016 at 1:14
  • In my answer, I purposely avoided the controversy of which order is best to pay off the debts. But since it has been brought up, here is my take.
    – Ben Miller
    Commented Jun 23, 2016 at 3:40

The accepted answer is excellent. If you follow that method, you will be successful in eliminating your debt.

I do want to add an answer addressing one part of your question.

My wife will soon be able to pay half the monthly rent, so that's $550 extra per month for me.

This mindset will hold you back in your finances. Separating your finances to this degree will tend to make communication difficult and lead to overspending and waste. You and your wife need to be on the same page. Do your budget together with your total combined income. Pay off your debts with your total combined income. The debt is affecting both your lives anyway, what reason is there to not work on it together?

This will be good for your marriage in the long run, but it will probably be hard at first.

This does not mean that you should never have any separate accounts or private spending money. It just means that you need to be communicating and working together to get out of the mess that is adding stress to both of your lives!

Good Luck!

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .