Her Husband Refinanced Their Car And Now They’re Stuck With A Terrible APR. ‘The Dealership Will Always Be Happy To Refinance At 25% APR’
- Finance
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- 9 minutes read
A Minneapolis mother of two thought her family was making steady progress, until a single financial decision quietly blew a hole in their budget. Her husband refinanced their car to pull out $3,000 in cash and the move left them stuck with a crushing 25% annual percentage rate.
The caller, Cathy, shared her story on “The Ramsey Show” with hosts George Kamel and Ken Coleman. What started as an attempt to cover short-term expenses quickly turned into a long-term financial problem that now threatens to snowball.
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Originally, the couple’s car loan carried a 14% APR. That was already high, but manageable. When Cathy’s husband tried to get a personal loan for $3,000 and was denied because of poor credit, a lender suggested refinancing the car instead.
“He was trying to get money to pay some things and decided to take out $3,000 on top of the car loan,” Cathy said.
That refinance bumped the interest rate to 25%. The new loan balance sits between $17,000 and $18,000, while the car itself is worth about $7,200. That leaves the family roughly $10,000 underwater.
“If this guy can’t pay, we get a car out of it,” Kamel said, explaining why lenders were willing to approve the deal. “Oh, and by the way, his credit shot, so the APR is 25%.”
The bigger issue, though, wasn’t just the loan. Cathy said she wasn’t involved in the decision at all.
“I didn’t know until after it was done,” she said.
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The couple earns about $70,000 a year from the husband’s job driving a garbage truck. Cathy stays home with their children, ages 13 and 1, and homeschools. Their total debt load, including credit cards, student loans, a personal loan and the car, is just under $70,000.
“When your debt is the same as your income, there’s a big problem here,” Kamel said.
With no savings and one vehicle, their options are limited. Refinancing through a credit union could help, but Cathy has no income, and her husband’s credit makes approval unlikely.
That leaves one real path forward: aggressive action.
“I would be circling $18,000 if I were your husband,” Coleman said. “How quickly can I make $18,000 outside of my $70,000 job?”
