Should I consolidate loans and cards, or just cards, leaving multiple loans?
"My answer is similar to Ben Miller's, but let me make some slightly different points: There is one excellent reason to get a consolidation loan: You can often get a lower interest rate. If you are presently paying 19% on a credit card and you can roll that into a personal loan at 13.89%, you'll be saving over 5%, which can add up. I would definitely not consolidate a loan at 12.99% into a loan at 13.89%. Then you're just adding 1% to your interest rate. What's the benefit in this? Another good reasons for a consolidation loan is psychological. A consolidation loan with fixed payments forces you to pay that amount every month. You say you have trouble with credit cards. It's very easy to say to yourself, ""Oh, just this month I'm going to pay just the minimum so I can use my cash for this other Very Important Thing that I need to buy."" And then next month you find something else that you just absolutely have to buy. And again the next month, and the next, and your determination to seriously pay down your debt keeps getting pushed off. If you have a fixed monthly payment, you can't. You're committed. Also, if you have many credit cards, juggling payments on all of them can get complex and confusing. It's easy to lose track of how much you owe and to budget for payments. At worst, when there are many bills to pay you may forget one. (Personally I now have 3 bank cards, an airline card, and 2 store cards, and managing them is getting out of hand. I have good reasons for having so many cards: the airline card and the store cards give me special discounts. But it's confusing to keep track of.) As to adding $3,000 to the consolidation loan: Very, very bad idea. You are basically saying, ""I have to start seriously paying down my debt ... tomorrow. Today I need a some extra cash so I'm going to borrow just a little bit more, but I'm going to get started paying it off next month."" This is a trap, and the sort of trap that leads people into spiraling debt. Start paying off debt NOW, not at some vague time in the future that never seems to come." "First of all, congratulations on admitting your problem and on your determination to be debt-free.  Recognizing your mistakes is a huge first step, and getting rid of your debt is a very worthwhile goal. When considering debt consolidation, there are really only two reasons to do so: Reason #1: To lower your monthly payment.  If you are having trouble coming up with enough money to meet your monthly obligations, debt consolidation can lower your monthly payment by extending the time frame of the debt.  The problem with this one is that it doesn't help you get out of debt faster.  It actually makes it longer before you are out of debt and will increase the total amount of interest that you will pay to the banks before you are done.  So I would not recommend debt consolidation for this reason unless you are truly struggling with your cashflow because your minimum monthly payments are too high.  In your situation, it does not sound like you need to consolidate for this reason. Reason #2: To lower your interest rate.  If your debt is at a very high rate, debt consolidation can lower your interest rate, which can reduce the time it will take to eliminate your debt. The consolidation loan you are considering is at a high interest rate on its own: 13.89%.  Now, it is true that some of your debt is higher than that, but it looks like the majority of your debt is less than that rate.  It doesn't sound to me that you will save a significant amount of money by consolidating in this loan.  If you can obtain a better consolidation loan in the future, it might be worth considering. From your question, it looks like your reasoning for the consolidation loan is to close the credit card accounts as quickly as possible.  I agree that you need to quit using the cards, but this can also be accomplished by destroying the cards.  The consolidation loan is not needed for this. You also mentioned that you are considering adding $3,000 to your debt.  I have to say that it doesn't make sense at all to me to add to your debt (especially at 13.89%) when your goal is to eliminate your debt.  To answer your question explicitly, yes, the ""cash buffer"" from the loan is a very bad idea. Here is what I recommend: (This is based on this answer, but customized for you.) Cut up/destroy your credit cards.  Today.  You've already recognized that they are a problem for you.  Cash, checks, and debit cards are what you need to use from now on. Start working from a monthly budget, assigning a job for every dollar that you have.  This will allow you to decide what to spend your money on, rather than arriving at the end of the month with no idea where your money was lost.  Budgeting software can make this task easier.  (See this question for more information. Your first goal should be to put a small amount of money in a savings account, perhaps $1000 - $1500 total.  This is the start of your emergency fund.  This money will ensure that if something unexpected and urgent comes up, you won't be so cash poor that you need to borrow money again.  Note: this money should only be touched in an actual emergency, and if spent, should be replenished as soon as possible.  At the rate you are talking about, it should take you less than a month to do this. After you've got your small emergency fund in place, attack the debt as quickly and aggressively as possible.  The order that you pay off your debts is not significant. (The optimal method is up for debate.)  At the rate you suggested ($2,000 - 2,500 per month), you can be completely debt free in maybe 18 months. As you pay off those credit cards, completely close the accounts.  Ignore the conventional wisdom that tells you to leave the unused credit card accounts open to try to preserve a few points on your credit score.  Just close them. After you are completely debt free, take the money that you were throwing at your debt, and use it to build up your emergency fund until it is 3-6 months' worth of your expenses.  That way, you'll be able to handle a small crisis without borrowing anything. If you need more help/motivation on becoming debt free and budgeting, I recommend the book The Total Money Makeover by Dave Ramsey."
"Also, since I'm guessing OP isn't flush with cash, not having to come up with additional money to pay the student loans for some time will provide some short-term ""debt relief""... possibly reducing the possibility of racking up more CC debt." "If there is any fee at all on the cash advance, and zero interest on the student loans (for now), it's not worth it mathematically.  And for only 8 months of ""free"" money, it's rare for it to be worth it overall. You need to save a significant amount either by having a good net interest rate (e.g., saving 20% on another card and not paying any interest on the new loan) or by saving a lot on principal (e.g., paying off $100k now and not paying the interest on that for the next 8 months). I wouldn't worry about it hurting your credit score unless your credit is going to be evaluated during the time you're maxing your card. Part of your score (20-30% IIRC) is your credit utilization ratio, which is how much you have available vs. how much you're using. It's separate from the part that accounts for history, so it's only relevant at the time you're looked up." If I were you, I would pay off the car loan today. You already have an excellent credit score.  Practically speaking, there is no difference between a 750 score and an 850 score; you are already eligible for the best loan rates.  The fact that you are continuing to use 5 credit cards and that you still have a mortgage tells me that this car loan will have a negligible impact on your score (and your life). By the way, if you had told me that your score was low, I would still tell you to pay off the loan, but for a different reason.  In that case, I would tell you to stop worrying about your score, and start getting your financial life in order by eliminating debt.  Take care of your finances by reducing the amount of debt in your life, and the score will take care of itself.  I realize that the financial industry stresses the importance of a high score, but they are also the ones that sell you the debt necessary to obtain the high score. It's definitely NOT a good idea to pay off one of the smaller loans in your case - a $4k payment split across all the loans would be better than repaying the 5% / $4k loan completely, as it's the most beneficial of your loans and thus is last priority for repayment. A payment that splits across all the loans equally is, in effect, a partial repayment on a loan with an interest rate of 6.82% (weighed average rate of all your loans).  It's not as good as repaying a 7% loan, but almost as good. It might be an option to save up until you can repay one of your 7% loans, but it depends - if it takes a lot of time, then you would've paid unneccessary interest during that time. Are you doing the right thing? Yes, paying back some of the expense of college is a great way to show your gratitude. Could your sister also pitch in a little to help pay the debt down? Will you get approved for a $30,000 unsecured loan? You don't mention your credit rating but that will have an effect obviously. You might consider visiting a credit union with your father and co-signing a loan since it is his debt that you are assuming. You might still want to write a loan for your dad to sign even if he isn't co-signed on a loan. This could protect you in case of his death if there are other assets to divide. If you are not approved for a loan, you could also simply join your dad in paying down the highest-rate cards first and have a loan agreement for him to pay back that money if/when it is possible. You've mentioned that you have no collateral. There aren't many options for loans with no collateral. Your dad's bank or a credit union might consider a debt consolidation loan with you as a co-signer. That's why I mentioned going to a credit union. Talking to a loan officer at a local financial institution will make it easier to get approved. If they see that you are taking responsible steps to pay off the debt, that reduces your credit risk. If you do get a debt consolidation loan, they will probably ask your dad to close some credit card accounts. To add to @bstpierre's answer, you should automate all your loans except for the one with the highest interest rate.  Leave that one manual, and pay the most you can afford each month, to pay it off as quickly as possible.  Once you finish that loan, move to the next highest interest rate.  Ultimately, this won't be quite as convenient as just having 1 loan.  The differences are: You need to set up all the automatic payments.  This is probably comparable to in complexity of consolidating your loans. Each time you finish one loan, you need to turn off an automatic payment, and start doing the next loan manually. If you organize yourself well initially, you'll know exactly what order to do the loans in, so this shouldn't take too long. However, unless your consolidated loan has the same interest rate of your cheapest current loan, you will likely save money over-all by using this method. If I were you, I would pay one of them off completely, then cut the card up and close the account. I have the feeling that you would be better off with just one card. That's all I've ever had and I've never needed a second one. It can help keep you out of trouble, too. Then I'd apply $1000 to $1500 towards the other card, and blow the rest on something stupid. Win-win. I agree with the Dave Ramsey method as well. If you don't have $1k in the bank already, do that.  Total up the smaller debts and the best buy card.  if they are $4k all together, then pay them off.  Don't get caught up in keeping the smaller one around because they are at zero percent.  If they exceed $4k, then payoff the interest bomb best buy card, then pay off the smaller ones, starting with the smaller balance.  That is the only tweak I will make here.  Dropping any amount into the Citi balance is pointless because it only reduces the amount, not the total number of hands reaching into your bank account. Also, unless I missed it and someone already mentioned it, do keep in mind the impact of these credit cards balances on your credit score. Over roughly 75% usage on a given credit account reflects badly on your score and has a pretty large impact on how your worthiness is calculated. It gives the impression that you are a person that lives month to month on cards, etc. If you could get both cards down to reasonable balances to where you could begin paying on them regularly and work them down over time, that will not only look incredible for your credit report but also immediately begin making your credit worthiness begin to raise due to the fact that you will not have accounts that (I'm assuming here) are at very high usage (over 75% of your total limit.) If you have to get one card knocked out just to get breathing room, and you're boxed in here -- or honestly even if the mental stress is causing you incredible hardship day to day, then I suppose blow one card out of the water, reassess and start getting to work on that second card. I hope this helped, I'm no expert, but I have had every kind of luck with credit cards and accounts you could think of, so I can only give my experience from the rubber-meets-the-road perspective. Good luck! Please do not conflate number of credit cards with amount of debt. Consider two scenarios, The latter scenario yields much better credit scoring. Many recommendation sources suggest the following, Although your credit score seems very important, it is only important when you have financial interactions (such as applying for credit or services) where the other party makes decisions based upon the score. You should only obtain loans and credit when you want and it makes sense based upon your needs; choosing to live your life to serve credit scoring agencies may not be your happy place. "This sounds like an accounting nightmare to be 100% precise.  With each payment you're going to have to track: If you can account for those, then the fair thing to do is for one person to stop paying after they have paid the amount of principal they had at the beginning of the process, or possibly after they have paid an amount equivalent to the total principal and accrued interest they would have paid if they paid their loans individually.   The problem is, one of you is likely going to pay more interest than you would have under the individual plan.  In the example you gave, if your brother pays off any of your loans, he is going to be paying more in interest than if he paid on his 5% loans. If you pay the highest rate loans first, whoever has the lower total balance is going to pay more interest since they'll be paying on the higher rates until they've paid their ""fair share"".   I don't see a clean way for you to divvy up the interest savings appropriately unless you trueup at the very end of the process.   Math aside, these types of agreements can be dangerous to relationships. What if one of you decides that they don't want to participate anymore? What if one of you gets all of their loans paid off much earlier - they get the joy of being debt free while the other still has all of the debt left? What if they then don't feel obligates to pay the other's remaining debt? Are you both equally committed to cutting lifestyle in order to attack these debts? In my opinion, the complexity and risk to the relationship don't justify the interest savings." "Your companies are declining to lower your rates because you are describing it as being kind. When I was in a similar situation, I called each one, starting with the highest rate, and said this: For the last little while things have been tight and my balances have crept up on all my cards. Now I'm about to start a fairly dramatic paydown. I'm going to be doing highest-rate fastest, which is you. Are you able to lower my rate so that you can continue to collect it?  Some said no. Some said ""ask again when you've paid more than the minimum three months in a row."" Most said yes, and sometimes by a dramatic amount. It made a real difference to getting things under control. I agree with the other answers that $50 extra on each card is just not as fulfilling as putting all the extra to a single card. If you must still use a card (to put gas in your car, buy groceries etc) getting one card to zero will return you to not paying interest even when you use it, so you might want to start with your lowest balance and then go to highest-rate once you have one clear one you can use. (If your balances are all so high that it will take a year or more to get one to zero, then maybe not. But if one is low drive it down first.) As for the consolidation loan, for some people it's the key to saving interest and getting the debt behind them. For others it's a chance to catch their breath and run up even more debt. Most people cannot predict in advance which they will be or which others will be. Be aware that it is a risk. You can vow that you will never again cover payroll with a cash advance from the company credit card (or your personal one) but when push comes to shove, you just might anyway." This depends on the loan calculation methodology. If it is on reducing balance then yes. Else not much difference "From the comments, it sounds like you have a technical background. So I'm going to suggest you think of this as a technical problem: it's an optimization problem, where the variable you're trying to optimize for is total interest paid over the lifetime of the loans. Step 1 is making sure you're using the credit available to you most efficiently. If there's room in the credit limit for card #1 to move more of your debt there, then definitely move your balances from the higher-interest cards. However, be careful; some cards will have different interest rates for balance transfers or cash advances. And definitely don't move any principal from Card #3 until the 0% interest rate expires. Pursuing a bank loan as part of step 1 is valid as well. You could start with the bank you use for your checking account today. Credit unions can be a good source of lower-interest loans as well. Ensure that you fully understand the terms and interest rates, particularly if they change. Just be careful about applying for them; too many rejections can affect your credit rating negatively. You also mention in the comments that you're paying ""her"" mortgage. I don't know how the ownership is set up there, but either refinancing or taking out a home equity loan can be a way to consolidate debt. The interest rate on a home loan will almost assuredly be less than on your higher rate cards, especially taking the tax deduction into account. Step 2 is paying down the debt efficiently. The rule here is simple: Pay the minimum payment on all cards except for the one with the highest interest rate; any money you have above the minimum payments should go into paying down the principal on that one. In your case, that's Card #2.  Good luck!" Try the Envelope Budgeting System. It is a pretty good system for managing your discretionary outflows. Also, be sure to pay yourself first. That means treat savings like an expense (mortgage, utilities, etc.) not an account you put money in when you have some left over. The problem is you NEVER seem to have anything leftover because most people's lifestyle adjusts to fit their income. The best way to do this is have the money automatically drafted each month without any action required on your part. An employer sponsored 401K is a great way to do this.