QUESTION DETAIL
Related User
Votes
I have excellent credit and make good money, but I've been carrying credit card debt for some time. I have a mortgage and one car payment for $290/month. My second vehicle is older, but it is paid off and has only 54,000 miles on it. The private resell value on that vehicle is about $18,000. My credit card debt is about $25,000 - all of this debt is on zero to low interest rates from transferring balances around to keep it manageable. We continue to try and pay down our debt but it never seems to gain any traction. Just when we start to make a dent some unexpected expense comes up and we're forced to use a credit card for lack of funds on hand. My question is: should I sell my vehicle for around $18k and apply that to our credit card debt? Then, lease something to get me to and from work? I have read everything about buying vs. leasing and I fit the profile for someone that should lease (drive less than 10k miles per year, don't make modifications to car, want a warranty, etc.) but I have never leased before. By doing this, I understand we will have another car payment with nothing to show for it when the term runs out. However, we will have reduced our credit card debt substantially so that we could have it all paid off within a year. It feels like we'd just be taking out a loan against ourselves, transferring credit card debt for auto debt but would give us access to the equity we have in the vehicle.
ANSWER
The BIDaWIZ Team's Answer:
We have concerns about the $25,000 in credit card debt. You stated that you have managed or consolidated the debt so that your interest rate is at or close to zero. Did you recently transfer credit card debt to a zero APR account? If so, you need to be careful that the low interest rate doesn't reset in a year or so. Are you 100% confident that the interest rates on the debt will not be increasing in the near future? The second part of this relates to actually servicing the credit card debt. We imagine that every month or so, you need to pay at least a few hundred dollars in principal and interest. Couldn't you put that money that's in your budget towards a lease? There are plenty of decent vehicles on the market that cost around $200 or less. If you can sell your car for $18,000-$20,000 and the interest rate on the lease is in fact low, that would be the recommendation here. It would be helpful to understand your budget, but this is a general analysis.
