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’

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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A Small Cash Need Turned Into A Big Problem

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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Debt Matching Income And No Room For Mistakes

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?”

The hosts encouraged him to take on additional work, evenings, weekends, manual labor, warehouse shifts, whatever it takes. With training in holistic wellness and personal training, Cathy was encouraged to pursue part-time income from home, but was warned not to wait indefinitely if clients don’t materialize.

“If in a month or two or three months we’re not signing up any clients, you need to go work for somebody else,” Coleman said.

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How Desperation Turns Into Bad Debt

Coleman summed up the emotional side of the situation with a line that stuck. “The dealership will always be happy to refinance at 25% APR,” he said, and added that these situations rarely come from one reckless move. Instead, they build slowly.

“It starts with, ‘I can afford the payment,’” Kamel said. “Then it’s, ‘Student loans are an investment,’ or, ‘The personal loan will knock this out fast.’ And then desperation leads to refinancing the car loan.”

He called it “death by a thousand cuts,” adding that it’s far easier to go into debt than it is to climb out.

Getting Outside Help When Things Get Overwhelming

For households with higher incomes, situations like this can be a wake-up call to get a second opinion before desperation results in even worse decisions. WiserAdvisor can help connect people with a vetted financial advisor who fits their needs.

WiserAdvisor’s free matching tool is designed for households earning $100,000 or more a year and offers no-obligation consultations. 

For Cathy and her husband, the message from the show was that this is a crisis, but it’s fixable. It will just require more income, tighter discipline and, for the first time in a while, working as a true financial team.

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