I am 25 years old, pretty deep in debt, and engaged to be married. My fiancee, who I’ve been with for just over 7 years now, was gracious enough to tell me we could get married whenever I was ready. Now the problem – my debt. My debt currently consists of the following:
$15,837 auto loan @ 8.99% (54 payments left at $356.10/month, had to refinance to a 72-month loan last year after a financial disaster). I refuse to give up this car, it’s all I’ve ever wanted in a car. I will probably drive it until it dies on me.
$14,782.21 in a personal line of credit @ 11.99%. With the current payment of $355.83, this loan has about 53 payments left. This was the result of consolidating credit card debts that at the time all cards had interest rates of over 18%. I can live with this loan as is, but would like to see it paid off sooner.
As of January, thanks to overtime and my anticipated tax refund check, two of my three credit cards will be paid off, leaving a final credit card debt of roughly $8,325 @ 6.99% interest.
On top of my debt, I have no savings – Only $5, enough to keep my accounts open with my bank (I switched to a credit union, LOVE them). And I’m trying to pay as much off as possible so I can pay for my wedding 2 years from now. My parents can’t afford to contribute at all.
My general question is, what is the best plan to pay off both my last credit card and my personal loan, providing the most space in credit to use for my wedding at the lowest interest rate? Should I focus on paying off the personal line of credit, making as much room as possible at a locked-in interest rate? Should I focus on the credit card to help improve my debt-to-credit ratio further and have more space available on my lower-rate source? Or should I split my available payments between the two? And amidst all this, with the current crisis, would it be a good idea to try sometime late next year (about the time I start my wedding planning) to refinance the line of credit to a lower rate with shorter payment terms?
I appreciate your help.
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I can’t help but ask you if the need to reorganize your debt to go back in debt for the wedding isn’t something that you are trying to rationalize for emotional reasons rather than for your financial health.
The debts you have listed seem to be the result of not getting out of debt to begin with, but shuffling debts around. Would it not make more sense to start a new life together with a firmer financial foundation rather than an expensive day?
Believe me, I get the point of having that special day. The lifelong dream of the perfect wedding, the special dress and that special moment. I understand that these issues are emotionally charged and I’m used to hearing “But you don’t understand”, but I do.
You’ve written to me for my opinion, so here it is, scale the wedding plans way back right now to what you can afford to pay for without going further in debt. Is it him that you want, or the party?
Millions of people get married each year in simple ceremonies that do not cost a lot. They have receptions in cafeterias and homes of friends. They get married on what they can afford to spend to accomplish the goal of being united in marriage, not throwing the best party.
Jessica, you are in debt and broke. technically you are insolvent, with your liabilities exceeding your assets. If this is the guy for you, get married and when you can both save the cash and afford to pay for a bigger affair, do it latter. Besides, it is grossly unsafe for you to not have any cash in the bank in a savings account.
You don’t need to spend tens of thousands to be in love and want to spend your life together. Don’t start married life saddled in debt if you don’t have to.
I am sorry if these are not the words you wanted to hear from me, but they are honest words, from someone that does care. And by the way, if you want, I can perform the wedding ceremony for free as the officiant. I can do that in many states.
Jessica is Engaged, in Debt, and Broke But Wants Big Wedding by Steve Rhode