Credit Card Consolidation Concern

[disneysteve]

But if he is upside down on both cars then he is stuck - can't sell them

People get rid of cars all the time when they are upside down. They roll the loan balance into the new loan. Let's say a car is worth 12K and you owe 16K. Buy a replacement for 5K and take a loan for 9K. You reduce your total debt by 7K. Even if the rate is higher, the payments will be lower. If you have any savings to put toward the purchase, even better.

[platinum]

I'm not sure why you all want to focus on the cars. There is no problem in making those payments since I will no longer have the house mortgage payments and the credit cards will be reduced.

The only reason I can see to default on the cars is so I can be in a better position to negotiate a deal with the credit card companies, but as I said, they are essential to both my wife's and my work so that isn't an option.

I have been making financial decisions. I don't want the houses to go into foreclosure or short sales, but it's the only way to make things work. I don't want to not pay the credit cards, but I just can't afford the current payments so I have to negotiate them down. I can afford the cars and they are essential to keeping our income and jobs.

[boosami]

The only reason I can see to default on the cars is so I can be in a better position to negotiate a deal with the credit card companies, but as I said, they are essential to both my wife's and my work so that isn't an option.

The CC debt is not going to be negotiable if you are paying current on two auto loans. If you default on the car loans to get in a better position to negotiate with the CC debt collectors, the cars will be repossessed. Then you'll have no cars at all. Can you afford to pay the auto loans + credit cards in full if you lose both the mortgages?

[wincrasher]

Steve, it's hard to get your head around the idea that it's better to be still upside down, but for a lesser amount - but I do get it.

The trick would be what kind of rate would you get on a replacement auto loan that is on a used car with the balance far exceeding the value. I'd suspect that, if they could even get such a loan, the rate would be astronomical.

I think the issue here, in the end, is cash flow and not total indebtedness. So still, working on the credit cards is the best solution for that. With 2 homes in foreclosure, or at least seriously delinquent, he has a good bit of leverage with the CC banks.

[disneysteve]

I can afford the cars and they are essential to keeping our income and jobs.

Having a car is essential to your job. Having the cars you currently have is not. That's an important distinction.

I need a car for my job, too. I'm driving a 1998 Camry that I bought used in August 1998 when it was 1 year old, so it will soon be 12 years old. I paid it off many years ago. My wife's car is also essential. We paid that off the day we bought it 9 years ago.

Of course you could afford the payments if you didn't have a mortgage. The point is that you need to stop using debt to finance your lifestyle.

How much is each car worth and how much do you owe on each? Maybe the advice to sell the cars doesn't apply to you, but without numbers it is impossible to say.

[ActYourWage]

I'm not sure why you all want to focus on the cars. There is no problem in making those payments since I will no longer have the house mortgage payments and the credit cards will be reduced.

The only reason I can see to default on the cars is so I can be in a better position to negotiate a deal with the credit card companies, but as I said, they are essential to both my wife's and my work so that isn't an option.

I have been making financial decisions. I don't want the houses to go into foreclosure or short sales, but it's the only way to make things work. I don't want to not pay the credit cards, but I just can't afford the current payments so I have to negotiate them down. I can afford the cars and they are essential to keeping our income and jobs.

You sound like you are in debt denial and have been living WAY above your means. You have alot of debt and getting rid of the CC debt isn't going to solve any problems until you solve your attitude toward debt.

[Runaway Finances]

Once again DisneySteve is absolutely correct!