Choosing The Best Repayment Option

Rini has 3 different options for tackling her credit card debt, and they involve interest rates. Dave tells her the best option, and something else.

QUESTION: Rini has $80,000 in credit card debt, but the good news is that they are all at low interest rates that will expire in April. She can either take out a home equity line of credit and pay it all off, or take a clean sweep loan at 7.99% interest, or move $40,000 to a credit card with 3.9% fixed. They make $125,000 a year. Which should she take?

ANSWER: I would take the 3.99%, but more than the interest rates, we do what it takes to get you out of the coma, and you go from coma to intense, getting-out-of-debt mentality. Selling stuff, living on beans and rice, and don’t go to a restaurant unless you’re working there as your extra job. Cleaning up your mess and living small is what will get you out of this, not interest rates. There is no interest rate that will get you out of debt. It’s cash flow, which comes from your willing to sacrifice deep into the mathematics.

You make a lot of money, so I want you to clean this mess up and have you look at your situation with pride instead of shame. For the next 2 years, you won’t have a life. Pay $50,000 a year on your debt and get intense to clean this up.