I Didn't Realize My 48% Interest Rate Was This Bad

Summary

The Ramsey Show Highlights: "I Didn't Realize My 48% Interest Rate Was This Bad"

Release Date: May 7, 2025
Host/Author: Ramsey Network

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Introduction

In this gripping episode of The Ramsey Show Highlights, Karen, a 66-year-old widow, reaches out for financial guidance amid mounting debts and a struggling business. Hosted by Dave Ramsey with insights from co-host George Kamel, the discussion delves deep into the perils of high-interest loans and the challenges of managing a small business in distress.

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Karen's Financial Predicament

Karen begins by outlining her precarious financial situation:

• Age & Status: 66-year-old widow with no children or immediate family, relying solely on Social Security.
• Health Concerns: Recently underwent heart surgery.
• Business Struggles: Owner of a small dog grooming business facing significant financial hurdles.
• Debt Overview:
  • Personal Loan: Borrowed $29,000 from an online personal loan company at an astonishing 48% interest rate.
  • Credit Cards: $8,000 on American Express and $8,000 on Citibank.
  • RV Loan: Owes $44,000 on an RV used as her residence.

Karen's decision to take out a high-interest loan was motivated by the need to eliminate credit card debt and invest in a mobile salon vehicle. However, she was unaware that the 48% interest rate was front-loaded, meaning the initial payments were overwhelmingly allocated to interest rather than reducing the principal.

Notable Quote:
[00:56] George Kamel: "Oh my God."

[00:56] Karen: "And it's front loaded. I mean, I mean, I heard the 48%, but I thought that's no big deal because I'm going to pay this off, like very quickly."

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Discussion on the High-Interest Loan

Dave Ramsey and George Kamel probe deeper into Karen's loan details to uncover the full extent of her financial strain.

Key Points:

• Loan Structure: The $29,000 loan had a front-loaded interest structure, causing most payments to cover interest initially.
• Repayment Plan: Karen intended to repay the loan within a year, assuming the interest rate was manageable.
• Interest Impact: George highlights that such a high interest rate resulted in Karen paying an extra $15,000 in interest alone.

Notable Quotes:
[01:42] Dave Ramsey: "So you were okay with a 48% for a year? I've never heard anybody say that before."

[01:46] George Kamel: "That's an extra 15 grand in interest alone."

[01:51] Karen: "Yeah, well, like I said, I, you know, I'm kind of ridiculously stupid at this particular point."

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Assessment of Karen's Business Ventures

Karen shares her aspirations to expand her dog grooming business into a mobile salon, believing it to be a niche market with little competition. However, both her mobile and brick-and-mortar businesses are unprofitable.

Business Details:

• Mobile Grooming Concept: A larger setup with two groomers operating in a contracted area for several days at a time.
• Investment Breakdown: The $29,000 loan was split between purchasing a van and converting it into the mobile salon unit.
• Market Viability: Despite her innovative approach, the business failed to generate sufficient income, leading to increased debt.

Notable Quotes:
[02:07] Dave Ramsey: "What's your business?"

[02:08] Karen: "It was. It's dog grooming."

[03:01] Karen: "This is the concept was a little bit different. It's a larger grooming situation where you have two people inside and then we would be situated in a contracted area..."

[05:23] Karen: "No."

[05:24] George Kamel: "Is that profitable? Is the brick and mortar business profitable right now?"

[05:23] Karen: "No."

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Comprehensive Debt Analysis

George and Dave systematically break down Karen's total debt, highlighting the unsustainable nature of her financial obligations.

Debt Breakdown:

• Personal Loan: $31,000 (including the $29,000 initial loan)
• Credit Cards: $16,000 ($8,000 each on Amex and Citibank)
• RV Loan: $44,000

Total Debt: Approximately $91,000.

Living Situation: Karen resides in an RV, further straining her finances with a $4,441 monthly payment, which she is currently struggling to manage.

Notable Quotes:
[04:05] George Kamel: "Just everything. All your debt."

[04:11] Karen: "Okay, total debt load with. The thing that I took out before was about 31,000. Then I have eight grand on Amex and about 8,000 on Citibank. And that's it as far as what I."

[04:37] Karen: "Yes, that's correct. I had a plan originally."

[06:27] George Kamel: "Well, what are you making from this? What is your yearly income from all of this after all of your expenses?"

[06:37] Karen: "Barely anything. Because everything I have goes."

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Proposed Solutions and Guidance

The Ramsey Network hosts offer strategic advice aimed at helping Karen extricate herself from the debt cycle and stabilize her financial situation.

Recommended Steps:

1. Asset Liquidation:

   • Sell the Mobile Grooming Van: Estimated resale value between $35,000 and $40,000.
   • Sell the RV: Although she owes $44,000, she could potentially sell it for $35,000-$40,000, allowing her to cover a significant portion of the debt.

2. Debt Repayment:

   • Use proceeds from asset sales to pay off high-interest debts immediately.
   • Eliminate credit card balances to stop accruing additional interest.

3. Income Stabilization:

   • Seek employment with a local pet grooming business, leveraging her skills and experience.
   • Consider part-time work (e.g., 20-30 hours weekly) to supplement Social Security income without overextending herself.

4. Temporary Living Arrangements:

   • Rent a modest living space to reduce monthly expenses from the RV loan.
   • Explore options like becoming a roommate to alleviate housing costs further.

5. Financial Planning:

   • Create a zero-based budget using tools like the EveryDollar app to monitor and manage finances meticulously.
   • Avoid taking on new debt and focus on building a financial safety net before re-investing in any business ventures.

Notable Quotes:
[05:23] George Kamel: "So here's what it sounds like. You're jumping from unprofitable to unprofitable... trying to strike Gold at some point."

[05:53] Dave Ramsey: "And to that end, Karen, we're trying to solve for you here. Could you make similar money just grooming for somebody else?"

[06:44] Dave Ramsey: "And what about 20 hours? Like just work part time?"

[07:08] Karen: "Van. Yeah, that's why I borrowed the money to."

[07:27] George Kamel: "Better than paying 15 grand in interest that you don't have."

[07:50] George Kamel: "The bank gave you 31,048% interest."

[07:53] Dave Ramsey: "Do it. I'm sorry for the sound effect."

[08:13] George Kamel: "Absolutely. And what's the RV worth? You owe 4,000 doll thousand on it. What could you sell it for?"

[08:33] Dave Ramsey: "Over some old lady's garage... where there's a will, there's a way."

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Karen's Response and Final Thoughts

Karen grapples with the emotional and practical aspects of the advice, acknowledging the difficulty of selling her RV and mobile salon but recognizing the necessity of drastic measures to regain financial stability.

Key Takeaways:

• Acceptance: Karen realizes that her current path is unsustainable and needs to make tough decisions to break free from debt.
• Action Plan: While daunting, the suggested strategies provide a clear roadmap for improving her financial health.
• Support Systems: The hosts emphasize perseverance and resourcefulness, encouraging Karen to seek community support and remain committed to her financial recovery.

Closing Remarks:
Dave reinforces the importance of taking immediate action, urging Karen to implement the proposed solutions to transform her financial situation.

Notable Quotes:
[08:41] George Kamel: "What's your payment on the RV?"

[08:47] George Kamel: "Okay. Take your 441 that you'll save by getting rid of that plus your Social Security plus your part time hours and you can afford rent somewhere you might need it."

[08:56] Dave Ramsey: "There's some gold. I guarantee you there's some golden girls in your community that would love to have a roommate."

[09:00] Dave Ramsey: "We told you exactly what to do. This is doable but you gotta do it. Change your life."

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Conclusion

Karen's story serves as a cautionary tale about the dangers of high-interest debt and the importance of thorough financial planning, especially for small business owners. The Ramsey Show Highlights offers compassionate yet firm guidance, empowering listeners to take control of their finances through strategic debt management and realistic income strategies. By following the advice presented, Karen and others in similar situations can work towards financial freedom and stability.

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Create your free EveryDollar budget today. The simplest way to budget for your life.

Transcript

[Dave Ramsey]

Brought to you by the EveryDollar app. Start budgeting for free today.

[Karen]

I'm a widow. I 66. I have a small business that's kind of struggling. Recently had heart surgery, et cetera, et cetera. No kids, no family? Two dogs. Two dogs live on Social Security. And some from my business and credit cards. I managed to get into a situation. I borrowed money from a personal loan, an online personal loan company, nationally advertised, all that kind of good stuff. Went through the whole process because I wanted to pay off some. Some debt, you know, to get rid of my credit cards and to invest in a. A vehicle for my mobile salon. And managed to find out that the interest rate is somewhere around 48%.

[George Kamel]

Oh, my God.

[Karen]

And it's. And it's front loaded. I mean, I mean, I heard the 48%, but I thought that's no big deal because I'm going to pay this off, like very quickly. And so I didn't pay attention enough to hear that it's front loaded. So the amount of money that I.

[George Kamel]

Borrowed, most of your payments are going to interest, essentially not touching the principal. How much was the loan for?

[Karen]

It's half and half is what it is. I ran a thing this morning. How much is going to principal?

[Dave Ramsey]

How much was the loan for?

[Karen]

$29,000.

[Dave Ramsey]

And how soon were you planning to pay that off? When you just stared 48% and went, Ah, no big deal. How quickly were you planning to pay that off? Those were your words.

[Karen]

Within a year. Within a year.

[Dave Ramsey]

So you were okay with a 48% for a year? I've never heard anybody say that before.

[George Kamel]

That's an extra 15 grand in interest alone.

[Karen]

Yeah, well, like I said, I, you know, I'm kind of ridiculously stupid at this particular point.

[George Kamel]

Yeah, no, I mean, I'm not here to bash you. I'm trying to understand the desperation that led you.

[Dave Ramsey]

Yeah, that's what I'm. Is this for your business?

[Karen]

Yes.

[Dave Ramsey]

What's your business?

[Karen]

It was. It's dog grooming.

[Dave Ramsey]

Why did you need 20. Why did you need $29,000 for a dog grooming business that's struggling.

[Karen]

To go into the next phase? And. Excuse me. Didn't expect that it's going into a mobile situation, a mobile grooming situation with a very specified market that nobody's really tapping into at this point?

[George Kamel]

And what is the market?

[Karen]

You know? Well, I don't really want to say it out loud. Oh, okay.

[George Kamel]

Competition.

[Dave Ramsey]

Okay.

[George Kamel]

You don't give away your shark tank idea here.

[Dave Ramsey]

Okay, so.

[George Kamel]

But I hire mobile groomers. So I'm just curious because I pay these people and I understand how the.

[Dave Ramsey]

Business works and I've used a mobile groomer as well, so. But. Right, but this was a.

[Karen]

This is a. The concept was a little bit different. It's a larger grooming situation where you have two people inside and then you. We're situated in a. In an area, a contracted area that we would be there for three or four days and we would.

[George Kamel]

Okay, gotcha. You kind of park up shop.

[Dave Ramsey]

So we're all. The only reason we're digging is like a pop up. Got it. But the only reason we're digging on this is we're trying to figure out how we help you get out of it. So the question is, was the 29,004 like a van or some type of.

[George Kamel]

Vehicle or is it just the equipment.

[Dave Ramsey]

Or was it just other stuff?

[Karen]

It was.

[George Kamel]

You're breaking up on us, Karen.

[Karen]

I'm sorry. It was part for the vehicle and then the other part for the conversion of the vehicle to the unit that I was trying to achieve.

[George Kamel]

How much could you sell this thing for to someone else who does mobile grooming?

[Karen]

I believe in easy. 40, 40, 45,000.

[George Kamel]

And what's your total debt that you owe? Everything but the mortgage on the vehicle?

[Dave Ramsey]

Just everything. All your debt.

[George Kamel]

Because you said you had other debt and you took out this debt to try to pay off some other debt. So what is your total debt load right now?

[Karen]

Okay, total debt load with. The thing that I took out before was about 31,000. Then I have eight grand on Amex and about 8,000 on Citibank. And that's it as far as what I. Oh, and about. And 444,000 on the RV that I bought to live in.

[George Kamel]

So you're living in an RV right now?

[Karen]

Yes, that's correct. I had a plan originally.

[George Kamel]

We all have a plan until life punches us in the face.

[Dave Ramsey]

So how. How. How. If we. If we were to sell this, do. Can you sustain yourself on just regular pet grooming or do you have to be a mom?

[Karen]

I have a. Well, it's part of, you know, to continue on with the mobile business. Just because of the culture of employees and such. Since COVID I have a standalone. I mean, I have a stick and mortar business also, but I was going to keep it in a small.

[George Kamel]

Is that profitable? Is the brick and mortar business profitable right now?

[Karen]

No.

[George Kamel]

So here's what it sounds like. You're jumping from unprofitable to unprofitable to unprofitable, hoping to strike Gold at some point. And instead you just keep digging a hole by maxing out these cards and jumping to another piece of debt to try to cover the other debt. And so we're trying to stop you from playing the shell game. And number one, create a profitable business. And two, get out of debt. And that might mean a clean slate. Where you get rid of this mobile grooming truck, you sell it, sell the rv, you rent for a while, get rid of all your debt, create a foundation, and then start slow and with cash.

[Dave Ramsey]

Yeah, I just. And to that end, Karen, we're trying to solve for you here. Could you make similar money just grooming for somebody else? Just somebody else who's got a business and they're looking for a solid person like you. You're not going to flake on them. You've got the skill set. Can you make the same amount of money working for somebody else as a groomer?

[Karen]

If I wanted. If I was able to work full time and work as hard as I used to, yes. I. Like I mentioned before, I'm 66 and I had.

[George Kamel]

Well, what are you making from this? What is your yearly income from all of this after all of your expenses?

[Karen]

Barely anything. Because everything I have goes.

[George Kamel]

That's what I'm saying. You could go work a retail job and not break your back doing this and get out of this completely.

[Dave Ramsey]

And what about 20 hours? Like just work part time? They need groomers. You're a dream for somebody trying to find one. I know, but. What. But Karen, listen. We want you to sell all this stuff and you got Social Security coming in. Work 20, 30 hours, do whatever you can. But selling the RV and selling this van gets a whole lot of.

[Karen]

Van. Yeah, that's why I borrowed the money to.

[George Kamel]

Where's the money right now?

[Karen]

Well, I was afraid to spend it once I figured out what how much it was going to cost me, so I kept it and just let it pay itself.

[George Kamel]

Wait, so can you just go ahead and pay off the loan then?

[Karen]

I could, but it would take everything. Pretty much everything.

[George Kamel]

Better than paying 15 grand in interest that you don't have.

[Dave Ramsey]

Yes. Karen, this is get out of jail here. This is get out of jail.

[George Kamel]

I thought the damage was done and you already bought the van and did the renovations. But if you have the money sitting there.

[Karen]

No, no, it's not even there yet.

[Dave Ramsey]

Hit the rewind button.

[George Kamel]

The bank gave you 31,048% interest.

[Dave Ramsey]

That's it. Rewind this whole deal.

[George Kamel]

31 grand.

[Dave Ramsey]

Do it. I'm sorry for the sound effect.

[George Kamel]

No, it's great actually. I like that.

[Dave Ramsey]

Really. Karen, hit the rewind button and get out of this deal. Go work for a local groomer who is going to be thrilled to have a 66 year old experienced, non flaky Gen Z groomer. And they're going to pay you well and you get some breathing room. Am I right George?

[George Kamel]

Absolutely. And what's the RV worth? You owe 4,000 doll thousand on it. What could you sell it for?

[Karen]

No, I owe 40,000.

[George Kamel]

Oh my goodness.

[Karen]

What I could. What I could sell it for is about between 35 and 40.

[Dave Ramsey]

Do it.

[Karen]

It's a. It's a 24. Where the hell am I gonna live?

[George Kamel]

Rent somewhere within a.

[Dave Ramsey]

Over some old lady's garage. Because she needs some companionship and she wants somebody who can. I'm telling you, where there's a will, there's a way.

[George Kamel]

What's your payment on the RV?

[Karen]

4 441.

[George Kamel]

Okay. Take your 441 that you'll save by getting rid of that plus your Social Security plus your part time hours and you can afford rent somewhere you might need it. You know to.

[Dave Ramsey]

There's some gold. I guarantee you there's some golden girls in your community that love would love to have a roommate. I mean you gotta look, you gotta find it, you gotta happen to life, Karen. And we've been talking to a lady who life has been happening to her. Gotta flip the script here. We told you exactly what to do. This is doable but you gotta do it. Change your life. This is the Ramsey show. Create your free every dollar budget today. The simplest way to budget for your life.