Just had an idea about getting rid of some of my debt

[hehateme000]

I know this may sound stupid, and I have already heard the opposite, but this is a unique scenario I was wondering if it made any sense.

ONe of my 2 cars is a 13 civic, worth about 17k. I just got it a couple months ago. The loan balance right now on it is about 21.5k....SO if I sold it I would have a 4.5k loan and only 1 car.

But if I got financial aid through my school, including grants and loans, I could probably get about 6-7k this upcoming semester. I could then pay off the rest of the balance and have a little bit left over for a cheap commuter car.

I understand that this would add a little debt to my situation because of the school loans, but I would be getting rid of way more debt, 21k. I would cut my debt by 1/4 if I did this.

The other thing is that between the car payment and the full coverage insurance, I would save about 500 extra a month once the loan was paid off. That could then go to additional debt.

I did the calculations on excel and it seems the fastest way to get out of debt would be this way. Here are the calculation:

By 12/16 total debt would either be 21k or 5k. 21k if I didnt sell the car, 5k if I did sell the car

[AnotherReader]

You have just stepped back from the edge of bankruptcy and you want to borrow non-bankruptable student loans? In my opinion that's, well, unwise.

You cannot borrow your way out of debt. If you had good enough credit to get a zero percent credit card and had the discipline not to spend more on it, that would make sense as a way to cut your interest expense and pay your debt off faster. You need to man up, stop borrowing (especially for impulse purchases), and look for ways to increase income and decrease spending. You can solve your financial problems, but you and your SO are going to have make sacrifices to accomplish that.

[hehateme000]

Yea I understand that. We can already get down from 67k to 21k in a year and a half without taking on more debt which will be nice

but besides taking on more debt, what is bad about selling the new car and using the small school loan to buy a cheap used commuter? I would automatically take about 17k of debt right off my total, that is including the 5-6k loan I would get

[Joan.of.the.Arch]

Is there a reason not to sell your car, put that money towards your debt AND toward school expenses, drive your other car (NOT buying another 2nd car), and not take school loans? If you do not need school loans to pay for school expenses, don't take out the loans.

[AnotherReader]

You are substituting non-bankruptable debt for debt that is easier to clear if things go haywire. Given the tenuous relationship you have with your SO, keeping things simple will make a split easier and less expensive for you if you end up separating.

What are the rules for student loans? Do they not require good credit to obtain? Could you even qualify?

Getting rid of the expensive car is a great idea. If you focus on cutting expenses and raising income, you should be able to squeeze out enough cash to pay it down to the point you can sell it. Sell everything you don't need and take on extra work, a la Dave Ramsey.

Is your SO on board? Is she contributing to the expenses now, and does she agree with your plans? Doing much of anything is going to be difficult without her agreement and participation. I would put my energy there, as the long term benefit of that is huge.

In your shoes, I would put my nose to the proverbial grindstone and throw every available dime at the debt. Step away from the spreadsheets and get to work. You will probably find paying stuff off and relieving the debt to be one of the most freeing things you will do in your life and much more motivating than a spreadsheet.

[creditcardfree]

I would NOT suggest using student loans for buying a car. Student loans are for tuition and books. I have seen several people get into trouble by taking out student loans for more than tuition and books.

You need to walk into a bank and tell them your plan. You will sell your vehicle for $X, which is less than you own on the loan. You need a personal loan for the difference. See if they will loan you the difference, and MAYBE a little more for a less expensive vehicle. Try several banks if needed, but if you get a few no's then this is again that you are not a good credit risk and they see you as in over your head.

I have to agree with everyone else, you need to trim expenses to the bare minimum...if you don't need it to live then you don't need to spend money on it. You also need to put ALL extra funds towards debt. You might look at my blog and search 'snowflake' to see all the ways we are finding extra money. Although a part time job might be even better than your situation.

Are you aware of how to snowball debt? Pay the minimum on all but one debt. You pull all excess funds plus it's minimum toward that debt each month. Once it is paid off you move that money to the next loan, you keep adding those minimum payments you were making to the paid off loans to the new debt.

[Eagle]

Yes the idea of borrowing on student loans to pay off a car loan sounds stupid Hehateme000. The scenario you presented doesn't change that you can't borrow your way out of debt.

You have just stepped back from the edge of bankruptcy and you want to borrow non-bankruptable student loans? In my opinion that's, well, unwise.

You cannot borrow your way out of debt. If you had good enough credit to get a zero percent credit card and had the discipline not to spend more on it, that would make sense as a way to cut your interest expense and pay your debt off faster. You need to man up, stop borrowing (especially for impulse purchases), and look for ways to increase income and decrease spending. You can solve your financial problems, but you and your SO are going to have make sacrifices to accomplish that.

I agree with AnotherReader... Hehateme000 the student loan idea is a bad idea see my post below from your other thread... You already asked this question and ppl responded to it. So it's not really a new idea. I don't think asking the question again is going to get a different response from people.

From 05-13-2014, 09:44 PM

I am still in school so my SL payments are deferred for a while. Also would it help to get a student loan at a lower interest rate and put that money toward on of the cars, or put it in the bank to have a quick emergency fund?

From 05-14-2014, 01:20 PM

And... NO! Lol. Do NOT take out another student loan in order to pay down one of the cars or put in the bank for an e-fund. You can't borrow your way out of debt. You need to either increase your income or decreases your expenses.

Preferably both.

You have a plan to make more money at work Hehateme000... Potentially an additional 9k a year. And you've started cutting expenses. That's the answer. Focus on these things.

Slow and steady with good decisions wins the race to being debt free. You didn't get into debt over night and getting out will take time as well.

[autoxer]

If you use your school loan to buy a car, then how will you pay your school expenses?

[Eagle]

Yea I understand that. We can already get down from 67k to 21k in a year and a half without taking on more debt which will be nice

but besides taking on more debt, what is bad about selling the new car and using the small school loan to buy a cheap used commuter? I would automatically take about 17k of debt right off my total, that is including the 5-6k loan I would get

Older vehicles require maintenance. You don't have an emergency fund. So if you have an issue that costs you say $1000 or $2000 with a transmision, alternator, clutch, or need to buy new tires how would you pay for the expense?

If you had say 10k in your emergency fund it wouldn't be an issue. Currently though you really need to focus on building an e-fund to 1k and then to say 5k.

[Petunia 100]

I am wondering how you expect to pay off 46k of debt in a year and a half while making 45k, servicing a mortgage, and supporting a family of 4. This appears unrealistic, but perhaps I am overlooking something? Are you planning to sell things, come into some money, or other?

[Bob B.]

I'm glad you've got spreadsheets, and are making projections, and are interested in reducing your debt. When I had a pile of debt, I made up spreadsheets, and made loads of projections using different assumptions, too.

You can make projections using different spreadsheets all day long, weeks on end. But, there are really only two ways to get out of debt: 1) reduce spending, or 2) increase income. If you can decrease spending while increasing income, that works even better. That's it.

Continue using the spreadsheets to monitor your progress. That's great. But, after your spreadsheets and projections are created, you still have to do the hard, dirty work of changing your spending habits.

Good Luck.

[LivingAlmostLarge]

School loans are a bad idea to pay off more debt. You can't discharge it. I agree you just have to buckle down and pay off debt period. No matter what debt it is.