A DRIVER took out expensive loans to cover her rent and refinanced her car after being made redundant – she was exhausted by high interest rates.
It only took a few bad decisions before the 26-year-old realized she would have been better off adjusting her spending habits after losing her job rather than opting for expensive loans.
Alex sat down with Caleb Hammer (@CalebHammer) to talk about what he learned from his financial situation in an episode of his YouTube series called Financial Audit.
When she was laid off from her job at a remote call center, Alex took out two loans with interest rates of 29 percent.
He might have chosen another path if he hadn’t fallen in love with a letter he saw in the mail.
But he stressed: “I know I needed it.”
In their conversation, Caleb told Alex, “That’s one of the craziest interest rates I’ve ever seen in my life.”
Despite his unemployment, he did not decide to make any financial sacrifices to save money.
This led her into reckless debt and has buried her in debt.
When she was working, Alex said she made about $2,000 a month as a remote call center representative.
At the time, he had a car loan with 13 percent interest.
Alex said the monthly payments were $430.
Although he received $6,000 in compensation, that was not enough to cover all of his expenses.
Alex took out a personal loan of $6,100 at 29 percent interest to cover the rent.
He also refinanced his car to borrow more to cover that expense and also at a 29 percent interest rate.
As of this month, I had an outstanding car loan balance of $21,560.
What happened to Alex’s car payment?
The host named Alex spoke to a YouTuber named Caleb Hammer about what she learned after she was laid off from her job and took out loans to compensate.
- Despite his unemployment, he did not decide to make any financial sacrifices to save money.
- Alex earned approximately $2,000 a month as a remote call center representative before losing her job.
- When he was working, he took out a car loan with 13 percent interest.
- Monthly payments were said to be $430.
- Alex received $6,000 in severance after she was fired.
- The driver took out a personal loan of $6,100 with 29 percent interest to cover the rental.
- He also refinanced his car at a 29 percent interest rate.
- Your monthly car payments are now $692.
- She shared that she had an outstanding car loan balance of $21,560 this month alone.
His monthly car payments are now $692, he shared.
Plus, the car is worth less than half of your loan balance.
The YouTuber estimated that her 2017 Ford Fusion is worth no more than $8,734.
She was in a situation that Caleb described as “dramatically backwards in this car.”
While it is a difficult situation, it is not specific to Alex, as the value of used cars has gone down while interest rates have increased in recent years.
This has pushed numerous borrowers into negative equity.
Drivers owed an average of $6,064 in reverse vehicle loans, according to Edmunds.
According to Experian, the average used car interest rate for subprime borrowers with credit scores between 300 and 500 was 21.55 percent as of the end of 2023.
So Alex’s interest rate is actually higher than what is typically offered to borrowers with bad credit scores.
It’s probably because you signed up with a random loan offer you received in the mail instead of talking to someone to find a regulated bank.
“Loan offers coming in the mail? “Those are the most predatory loans ever made,” Caleb told him.
“Other than walking into a payday loan place.”
