Not Solving The Problem
James is about to make his bad debt situation even worse, by trying to dig his way out of a hole.
QUESTION: James and is wife are pretty much broke. Their income is $55,000, but they still have $16,000 in active debt. Should he take out a loan to pay off his student loan debt? Dave says absolutely not and why it would add to their mess.
ANSWER: You haven’t done a budget yet. If you make $55,000 a year, that’s $4,000 a month take-home pay. Even with $800 a month in rent and $1,000 in child care, you still have $2,200 a month to pay on your debts. Paying off these debts with a student loan is a horrible idea; what you need is to cut your lifestyle and get on beans and rice. The last thing you need to do is borrow more money. You need to get AWAY from borrowing.