To pay off debt, save or take another loan?

To pay off debt, save or take another loan?
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I currently work as a registered nurse. I’m 24 years old and I make about 2,600/month. I have multiple accounts of debt.

  1. Credit card with $2,300
  2. Credit card with 5,600 (no interest for one year)
  3. Credit card with $2,200 (high interest rate)
  4. Credit card with $4,600 (high interest rate)
  5. Car note of $5,900 (high interest rate)
  6. Car insurance $150/month
  7. Student loan $100/month
  8. Rent $1,399 month plus utilities

I’m moving in with my dad starting next month so I can save on rent. I will pay him $250/month. I want to be able to save for emergencies and be able to invest in real estate. My credit was 669 last month (May) and dropped 28 points this month (641). I know that to be able to pay less when purchasing a home I should have a higher credit score. I would like to use real estate as a source of passive income. Also, I would like to go back for my Masters, the program would cost $40k so I would need to take out another loan. Should I?

How can I address these financial issues?

I paid an extra $100 on all of my bills today except my car note because I plan to trade it in later on this year.


Hi @Brookecspence. It’s great that you’re looking at your financial situation as a whole and framing it as “how best can I achieve my goals?” It’s also wise that you’re viewing your debt in terms of interest rate so you can tackle the most costly debts first.

Only you can decide whether the $40,000 master’s program makes sense for you, depending on career goals and whether the earnings bump will offset the cost.

While you weigh that, you could use the time living with your dad to really knock down your high-interest debt. Check out the debt avalanche method, which focuses repayment effort on the highest-interest debt first. It can save you money overall by wiping out the costliest debt soonest, and may also get you out of debt faster.

Sometimes people prefer debt snowball, which focuses on the smallest debts first, so they get a few quick wins to fuel their resolve. You can use our debt calculator on this debt payoff guide to compare the two methods.

As you bring down your credit card balances your credit score will likely rise. That’s because you’ll be lowering your credit utilization (how much of your credit limits you have in use). Utilization is one of the two major factors that affect your credit score.

Here’s a great guide to balancing financial goals. It will walk you through getting a small emergency fund started, then picking off the next task, etc.

Best wishes on your financial journey!


Double-clicking on what @khinson says. I love that you’ve come up with a plan to save money and want to pay down your debt and improve your credit.

For context on student loans: How much will the master’s boost your income? When it comes to undergraduate debt, we generally recommend limiting debt to what you’d make in your first year out of school. A master’s wouldn’t have to deliver a $40,000 boost the first year to be worthwhile, but it typically should provide a substantial boost in your potential income at graduation and over time. Here’s a good Ask Brianna column that has advice about paying for graduate school: