Question: All advice greatly appreciated . .

I owe about $15,000 (credit cards and 1 personal bank loan).

I’ve no mortage (house purchased for $217,000.00 in September of 1999) and recently paid cash for my car ($20,570.85 after a trade-in allowance of $3,256.00).

I’m considering re-financing my personal loan (about $3,000 o/s) and paying everything off. I’ll keep one credit card for emergencies (and get the limit cut back to $1,000.00), get rid of all my department store cards, include enough in my new loan to pay cash for all X-Mas gifts then start fresh and really get my finances in order.

(I’m single – separated for 11 years, actually – and supporting a 16 year old son. My annual salary is approx. $50,000).

Thoughts/advice/words of wisdom, please.

Answer: If you had a $100,000 mortgage most reasonable people wouldn’t consider that you were over your head in debt. I’d think most people would say you’re in pretty good financial shape, having a total indebtedness of only $15,000. Presumably, besides what you’ve told us, you have some savings, a retirement plan, a 401-k, some investments, some assets of some kind in addition to the house and car.

Pay off the personal loan and the cards and you’re as completely in the clear as anyone could hope to be.

If it’s the loans that bother you, borrowing *more* for holiday shopping isn’t going to make you feel better. Contrary to what you say, you wouldn’t be paying “cash”, you’d still be taking out a loan, it just wouldn’t be on a credit card. If you want to be completely debt free, don’t borrow more and pay off the debt you have. Rolling high interest debt over into low interest debt can be worthwhile – corporations and governments do it all the time.

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