At This Rate I'll Never Pay Off My Car (14% Interest)

Summary

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Episode Overview

Episode Title: At This Rate I'll Never Pay Off My Car (14% Interest)
Date: June 12, 2026
Podcast: The Ramsey Show Highlights
Host(s): Ramsey Network Team

In this episode, the hosts advise Nathan, a 21-year-old struggling to pay off a heavily underwater car loan with a steep 14% interest rate. The discussion centers on practical strategies to escape crippling auto debt, the pitfalls of high-interest car loans, and broader lessons about car buying and personal finance.

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Key Discussion Points & Insights

Nathan's Situation (00:06–01:36)

• Background: Nathan bought a truck for $29,000 nine months ago. Despite regular payments, he still owes the full balance.
• Shocking Interest Rate: The loan carries a debilitating 14% interest.

  C (01:13): "No, it should be more like 22ish probably."

• Current Car Value: Local dealer offers $17,500 for the truck—far below the purchase price.
• No Negative Equity Rolled Over: Nathan asserts he didn’t roll over previous debt.

Understanding the Numbers & Problems (01:36–02:31)

• Interest Impact: The interest is likely washing out Nathan’s principal payments.

  B (00:28): "The interest payment you're making is probably as much as your monthly payment. So they're just washing each other out."

• Possible Overpayment: The hosts speculate the truck may have been overpriced at purchase.

  B (01:13): "So they may have sold you a $17,000 car for 29 grand. For all I know. I'm especially charging you 14% interest."

• Credit Status Surprise: Host shocked Nathan pays 14% interest with good credit (~780).

  B (01:30): "How did you get a 14% in? I mean, I just don't understand that."

Financial Pressure Intensifies (02:31–03:12)

• Income Drop: Nathan lost his higher-paying job; now earns about $44,000–$45,000/year, nearly $7/hour less.
• Insurance Costs: Truck insurance is $300/month because of age/risk.

Suggested Strategies for Escape (02:07–04:19)

• Sell the Truck: Cut losses and sell, even if underwater.

  B (02:07): "This truck needs to go and so you might need to save up the amount you're underwater on just to get rid of it and that would still be worth it."

• Beater Car Recommendation: Buy a cheap, reliable car in cash after selling the truck.
• Gap Financing via Credit Union: Take a personal loan for the deficit at a lower interest rate, using a local credit union.

  B (03:16): "I'd go down to your local credit union and see if they can give you a loan for the difference you're underwater on."

• Get Accurate Valuation: Sell private party (Kelly Blue Book value) or to Carvana/Carmax to get more.
• Reduce Liability: New loan for the difference plus an inexpensive used car cuts total expenses and gets Nathan "off the hamster wheel."

Broader Financial Lessons (04:20–04:41)

• Car-Value Rule of Thumb:

  C (04:20): "What you have in motors and wheels should be no more than half of your annual take home pay. And you exceeded that getting a $30,000 truck while making $45,000 a year."

• Interest Breakdown: Nathan is paying $7.14 per day in interest alone.
• Monthly Squeeze: Every month is a struggle to make ends meet with high payments and insurance.

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Notable Quotes & Memorable Moments

• "The interest payment you're making is probably as much as your monthly payment. So they're just washing each other out."
  — B, 00:28

• "How did you get a 14% in? I mean, I just don’t understand that."
  — B, 01:30

• "No way a $29,000 car nine months later is worth 17 grand."
  — B, 01:11

• "This truck needs to go and so you might need to save up the amount you’re underwater on just to get rid of it and that would still be worth it."
  — B, 02:07

• "At the end of every month I'm scrunching up pennies to try and make..."
  — Nathan, 03:12

• "Remember this rule of thumb too: what you have in motors and wheels should be no more than half of your annual take home pay."
  — C, 04:20

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Important Timestamps

• 00:06: Nathan outlines his dilemma.
• 00:25–00:41: Interest rate and car value shock.
• 01:13: Hosts question the car's listed value.
• 01:30–01:36: Host stunned by the high interest rate despite Nathan's strong credit.
• 02:07: Hosts recommend selling the car even if underwater.
• 02:26–02:31: Insurance cost weighs heavily on Nathan's finances.
• 03:16–03:37: Advice: Seek a credit union loan for the gap; tips for selling the car.
• 03:56–04:13: Real financial pain of current payments; interest per day discussed.
• 04:20: Warning about keeping car value within half of annual take-home pay.

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Final Takeaways & Advice

• High-interest, high-value auto loans can quickly trap new buyers in unmanageable debt—especially when incomes drop or expenses rise.
• Avoid buying vehicles exceeding half your annual take-home pay.
• Always seek multiple, independent valuations, and never accept high-interest loans with good credit.
• Cutting your losses, even when it's painful up-front, can be financially freeing in the long term.
• Utilize local credit unions, private sales, and always do the math before committing to a loan.

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(Summarized from The Ramsey Show Highlights — "At This Rate I'll Never Pay Off My Car (14% Interest)", June 12, 2026. All quotes are attributed as in the transcript, with timestamps for reference.)

Transcript

[A]

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[B]

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[A]

About nine months ago, I bought a truck for about $29,000. I sat down recently, looked at everything again. I still owe 29,000 on it and been making my payments every month. And I need help trying to figure out how to get out of this situation.

[B]

What's the interest rate?

[A]

14%.

[B]

Well, that'll do it.

[C]

Ouch.

[B]

The interest payment you're making is probably as much as your monthly payment. So they're just washing each other out.

[C]

How much can you sell it for? Nathan?

[A]

I just got it quoted for 17 5.

[B]

Why is it so low? Did you roll over negative equity?

[A]

No, I did not.

[C]

Was it for a trade in or a personal sale? And where'd you get it quoted?

[A]

It was at a local dealership. I was looking. I was just trying to figure out what I could get for evaluated at 17:5.

[C]

Yeah.

[B]

Who's they? The dealership?

[A]

Yeah, the dealership. Yes.

[B]

Well, it's the worst place to get it valued. I would look at the private party value on Kelly blue book because there is no way a $29,000 car nine months later is worth 17 grand.

[C]

No, it should be more like 22ish probably.

[B]

Now obviously you got screwed on this deal. So they may have sold you a $17,000 car for 29 grand. For all I know. I'm especially charging you 14% interest. Was your credit just shot?

[A]

No, I don't remember exactly what it was, but it was around the high 780s.

[B]

How did you get a 14% in? I mean, I just don't understand that.

[A]

Yeah, I. I don't.

[B]

You have any other debt, like everything?

[A]

No, I do not. It's that. So I. When I bought the, the truck, I was at my job. I was making $28 an hour. And then at the end of beginning of this year, my whole company got let go. And I've taken a. Almost $7 pay cut at my current job.

[B]

What are you making now?

[A]

Base salary right around 2162 an hour.

[B]

Okay, so about 44, 45,000 a year probably.

[A]

Correct.

[B]

Okay, well this, this truck needs to go and so you might need to save up the amount you're underwater on just to get rid of it and that would still be worth it. And you go get you a beater car to get you from A to B in the meantime until you can save up and buy something used in cash. But there's no other way to get out of the payments.

[A]

That plus all like the insurance I'm 21. My insurance is around $300 a month.

[B]

Yeah, that's expensive for young guys. A lot of risk for the insurance companies.

[D]

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[A]

At the end of every month I'm scrunching up pennies to try and make

[B]

your credit score still good. I'd go down to your local credit union and see if they can give you a loan for the difference you're underwater on. But still try to get top dollar for it. That might be private party, that might be like a Carvana or Carmax. But just see how small you can make that gap you're underwater on. Get a loan for the difference plus some to get you a beater car from A to B and you'll be out of this thing and be able to save up.

[C]

And, and your payments are going to, it's gonna, you're gonna feel the difference of what you're doing now and it's not making a dent. Right. Versus a, I don't know, a twelve thousand dollar loan from the, you know that you pay off the difference and then go get, go get a beater car.

[B]

It'll have a lower interest rate. Yes, for sure.

[C]

And yeah.

[B]

What's your payment?

[A]

Right Now I'm paying 586amonth.

[B]

Ouch. Plus the 300 in interest. So you're going to be.

[C]

And it's not even doing the loan.

[B]

That just hurts because, well, you're probably paying 586 in interest. So every month it's just, it's not moving the needle on the balance. And so that's, that's the issue.

[A]

I looked at the, I looked at the loan. It's. I think it was like $7 and 14 cents a day on interest.

[B]

Ouch.

[C]

Yeah. And Nathan, remember this rule of thumb too that your, what you have in motors and wheels should be no more than half of your annual take home pay. And you exceeded that getting a $30,000 truck while making $45,000 a year. So keep those vehicles below that so that you don't get stuck in the situation again. Thanks for the call.

[B]

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