‘I'm $127K in credit card debt': This Florida woman is underwater on her car, can't get a loan — because she owes six figures in consumer debt at an interest rate of 12%-18%. So what now?

Kamel sighed after learning that the average interest rate on this enormous pile of credit card balances is “between 12% and 18%.” Tina also has a car loan that’s underwater and is struggling to get another loan to pay off the difference. Delony isn’t a fan of that strategy.

“You’re half-a-million in debt,” he told her. “The fact that you’re considering trying to clean up some of your debt issues with more debt — at what point does it stop for you?”

But as the data shows, Tina’s not the only American starting 2024 with “debt issues.”

More: Consumer credit card debt by state

Consumer debt binge

Tina’s home loan is fairly typical. She believes her house is worth about $424,000, and the outstanding mortgage on it is $273,000. As of the second quarter of 2023, the average American had a mortgage balance outstanding of roughly $241,815, according to Experian.

Unfortunately, Tina seems to have overextended herself on credit card debt, which is more expensive. The 30-year fixed-rate mortgage average is 6.6%, according to the Federal Reserve, while Tina’s credit cards have double-digit interest rates.

Tina said she used her credit cards for a wide range of purchases. Cards financed stuff for the house and kids as well as “vacations that we shouldn’t have gone on,” she admitted. Now her family’s credit card balance is nearly 20 times larger than the average American’s balance of $6,365, based on Experian’s data.

Her car loan is similarly oversized. Tina owes $80,000 on the vehicle, but her dealer offered only $58,000 to repurchase it and her independent research revealed that the car is worth no more than $60,000. Experian’s estimate of the average auto loan in Q2 of 2023 was just $23,479.

There’s also student loans. Altogether, Tina believes she owes $233,000 in consumer debt.

It might sound like a staggering sum, but Tina’s not the only person facing a mountain of debt. Americans were collectively sitting on auto loans worth $1.59 trillion at the end of the third quarter in 2023, according to the Federal Reserve. Meanwhile, the collective credit card balance was $1.08 trillion, while student loan debt was $1.6 trillion during the same period. All three forms of consumer debt grew since the third quarter of 2022.

To break out of this debt trap, Kamel suggested that Tina may need to make the “ultimate sacrifice.”

Ultimate sacrifice

“This might be one of those situations where you make the ultimate sacrifice of selling the house,” Kamel told Tina.