Question:
Dear Steve,
I have credit card debt but yet need a new car.
I am in debt of about $15,000. I also need a new car very badly.
Should I get a loan to pay off my credit card debt and have one payment?
But then I would have to get yet another one to buy a car.
I am really confused. Can you help me find a solution?
Thanks,
Dana
Answer:
Dear Dana,
This is primarily a math problem. The most important question is how much of a car payment you can afford.
Then we have to consider if that, plus whatever debt repayment for the credit card debt, will fit within your current income.
Getting an unsecured consolidation loan for credit cards is expensive. Unfortunately, many places advertise such a thing but tend to use a bait-and-switch tactic to push people into debt settlement.
Making some smaller payments or one larger payment is the same drain on your income.
So without eliminating the credit card debt entirely, will moving it around allow you to afford a new car payment. The current average car payment is $700 a month.
That car payment statistic is something I covered in this recent podcast.
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Getting approved for a loan to purchase a new car is not hard. That’s not the issue. Remember that just because a lender will approve you and take the risk doesn’t mean you can afford it.
Without knowing more about your situation, I can best advise you to have a good handle on what you can realistically afford to pay for a new car before you make any purchase.
Your new car might even be an older used beater from a buy here pay here lot if that is all you can afford.
Ironically, new car financing is typically easier and more favorable than a used car.
I’ve seen other people overcommit to a brand new car payment. They then realize they are drowning and wind up filing bankruptcy discharging their unsecured debt but keeping the car.
I’m not promoting that approach, but it happens once people come to the reality that their wishful thinking they could afford both was not possible.
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Asked question about getting a new card with my credit card debt.
Thank you for your question. I just answered it.