“I Paid MORE IN INTEREST THAN MY CAR IS ACTUALLY WORTH”

I paid more in interest than my car is actually worth. My car was repossessed. These are things that you're hearing right now from people that bought a car and have gotten so far into debt that they lost the car and they actually ended up paying more for the car than the actual purchase price of the car. When you combine these car loans with the student loans that people have been getting over the past few years, it is leaving Americans in a crippling amount of debt. But first I want to talk about this car loan crisis that a lot of people are finding themselves in. Then we'll move on to student loans afterwards. One common thing and one common problem that a lot of people are running into when buying a car is they end up paying more for the car in interest payments than the actual purchase price of the car. Here's an example for you. This woman bought this car. She bought this Kia Rio back in 2017 and she borrowed $14,786 to buy the car. But guess what? Her interest rate on that loan was 25.17%. This is way before we had COVID. This is way before we had the hike in interest rates, anything like that. This woman got a 25% interest rate on a car loan back then. Her monthly payment was $402 a month and it was more than 25% of her take-home pay. So how do you find yourself in a situation like this? Well, usually it's because you have terrible credit and you can't get a traditional auto loan and you end up getting stuck with something like this called a subprime auto loan. But because the payments were 25% of her income, that's not a sustainable car payment, so she soon fell behind on the payments and they said, well, look, you qualify for an extension on your loan. And that allowed her to defer a couple of payments. But there's a problem with this kind of thing. They didn't explain to her that the extension allowed her to keep her car, but it also added $2,000 in interest charges to the cost of her loan. So it's just like the forbearance situations that we saw with real estate during the lockdowns like we talked about the other day, right? It's the same sort of thing. You defer your payments, you think you're going to get out of it, and then when it's time to actually pay again, you end up owing more than you did before. This is the exact same thing, only with a car loan. So this woman, she actually ended up reaching a point where she paid her lender more than she actually paid for the car and she still owed money on the car. Imagine finding yourself in a situation like that, guys. This is basically worst case scenario when it comes to buying a car. So she let the lender repossess the car and she's been trying to work her way out of debt ever since. And this is all because she ended up in this subprime auto loan. And this is yet another reason why I tell people, make sure you get out of debt. Make sure you don't have a lot of debt. Make sure you keep your credit score in good shape because you can avoid a situation like this in life just by following that simple advice. You're never going to need a subprime auto loan like somebody like this. If you just follow those few things. If you have a rocky borrowing history and a rocky payment history and a very low credit score, naturally lenders are going to be throwing you in the subprime category and this is what's going to be available for you when you need to go out and purchase a vehicle or anything for that matter. This is just related to vehicle. And the problem is once you get into the subprime market, a lot of lenders will take advantage of you because they know you have no other options. They will charge you an extra exorbitant interest rate because they know that's the only loan you can get. People like this, they don't have savings. They can't qualify for a traditional loan. They can't buy the car in cash. They can't qualify for a better rate due to their poor credit history and their high debt to income ratio. And get this, as of the second quarter of 2024, about 17% of auto loans were subprime. And the average new subprime loan payment during that time frame is $750 a month. And the average new subprime loan amount financed is $38,000, guys. People are buying quite expensive cars with these subprime loans and having a $750 a month car payment. I mean, that's already getting very close to the $1,000 a month car payment. That sounds ridiculous that people are paying for brand new cars without a subprime loan. And the problem is if you are basically taking out one of these loans and you know you're going to be struggling to afford it and pay for it, you're kind of just, you know, buying yourself extra time, but you're wasting a lot of your money because you know eventually you might not be able to make that payment if it's already a struggle from the get-go. And say your car has a problem, right, because that's all on you. You don't get to have repairs done for free or anything like that. So now your car needs a $3,000 repair and you have this $750 a month subprime auto loan payment, how are you going to swing that? You probably aren't going to be able to swing that. That's the problem. You're going to have to go into further debt potentially to make the repair on the car or you're going to have to miss a couple of car payments and risk losing your car to repossession like the woman in this story. And it's not really that hard to spot a subprime loan. Like basically if you're offered an interest rate on a car loan that seems extra high, it's a subprime loan, guys. And let's face it, everybody needs to be realistic with their financial situation. If you know you're somebody that has a lot of debt or you've missed a lot of payments in the past and your credit score is not that great, don't be shocked when you're offered one of these loans. Now you have to live with the consequences and figure out how to navigate from there. If it were me, what I would rather do instead is I would save some extra money in cash and buy a cheap car. And how do you know what's an exorbitant interest rate or unusually high? Anything that's in the double digit territory is definitely but probably a subprime loan, especially if it's over 12, 13%. The average borrower right now who's getting a car loan with good credit is anywhere between seven and 9%. Also, if you have a credit score that's below 670, you're probably being offered a subprime auto loan as well. Check this out. This is something rare we don't see on the walks too often. This is something this house actually recently sold and they actually listed it back in October for 5.98 million, never had to do a price reduction or anything and the house sold within a month, went pending within a month anyways and actually on Christmas Eve, the house closed and it's finally sold. So it's so rare to see houses sell that fast here in Miami and the thing that makes it even more surprising is it's basically a $6 million tear down. These are homes you don't see sell usually too fast. So somebody must have had a buyer lined up in the back pocket for this one. Now there is one other thing you can do if you must get the subprime auto loan, you have no choice, you need to get the car today. If without it, you're going to lose your job or whatever, you're in a dire situation. You can get the car today, get the subprime car loan. In the meantime, work on saving up extra cash, work on fixing your credit score. Within a year or two, maybe you can refinance that loan and get a much better loan for that vehicle and end up lowering your payment and you improve your credit score and your financial situation at the same time. So I think that would be the better thing to do if you must have the subprime loan today. Now let's move on to student loan borrowers, okay? Because these people are in just as bad a shape, if not even worse shape, than the people who are taking on these subprime auto loans right now, okay? There's going to be a lot of problems that are going to be coming down the pipeline for student loan borrowers very soon, especially now that Biden and Kamala are going to be gone. The first major change that a lot of people could be looking at is the SAVE program that was introduced in 2023 might be in limbo. It might go away. As of summer of 2024, we have about 8 million people enrolled in the SAVE program. As of right now, you have two federal courts that have blocked the SAVE program and these borrowers are now in limbo. And so far, we don't know what's going to come next for them. And that's why if you're in the SAVE program right now, you don't have any payments to make. Your payments are on pause because the whole thing is in litigation at the moment. For now, the best bet for people who are in the SAVE program is to continue with an income-driven repayment plan for your student loan debt until the rest of this gets sorted out. But what you're likely going to see happen for people that are defaulting on their loans is finally some real consequences. And it's raining, but they're still golfing, and I'm still filming. Probably what it's going to be is people who are deciding not to pay in hopes of getting student loan forgiveness are going to start seeing their wages and Social Security checks garnished in order to repay that debt. So people who thought they were just going to get away with not paying and not doing anything, that's not going to work. Like I've told people many times in the past, you need to keep paying your student loans regardless of what they're saying, because that sets you up for the best opportunity for any type of student loan forgiveness in the future. But for people who just don't pay altogether, then you're setting yourself up for failure, and then you're going to start seeing your wages garnished and all sorts of other problems like that. Because here's the thing, this whole program with the wages being garnished has been paused for the past four years. But it's very likely that the collections on these defaulted payments are going to start ramping up in 2025, especially once Trump is president again. And so imagine that too, guys. We already have this weak economy, where people are running out of money, don't have enough money to buy things and go on trips and do the normal things that people do in a good economy. But now you're going to have a chunk of people out there that are going to be losing a chunk of their income involuntarily. You weren't paying, now you are being forced to pay. That's another issue. And let's face it, a lot of people who are not paying are probably not paying because they can't afford to pay, not just because they're choosing not to pay. And a lot of people haven't been paying for so long that they might just think that they're in the clear, like, oh, nothing's been happening. They haven't been taking any of my money. I haven't been forced to make a payment. And they just forget about it, right? Well, they're going to be reminded of it very quickly as soon as they start seeing a chunk of the money come out of their paycheck. And this is going to be a huge shock to the economy. As if we already aren't seeing enough problems in the economy, this is going to be a whole other thing that we're going to have to contend with moving into next year. Anybody who has a student loan should be checking to see if they are behind on their payments. And you can check that out at studentaid.gov. And there you'll be able to figure out your repayment status and find servicers to contact for help staying current on your student loan payments. So if you're somebody who's already in default right now of your student loans, then the only thing you can really do is to talk to your current lender and talk about either consolidation or rehabilitation that will help you cure your default and get back on track. So guess what's going to happen, too, is you're going to see a whole new wave of defaults coming into 2025 because people have to start making these payments again, right? You already have the people that are at risk of collections. And now a bunch of the experts are warning about a wave of new defaults that could come as early as next year. And this is because over the past few years, there's been so many changes to the student loan system that borrowers may be confused about their options and because of the pause on the consequences of not paying the debt. So this whole student loan forgiveness thing and all of the back and forth of who's going to be in trouble and who's not is actually a big mistake because it's created a lot of confusion in the marketplace. And like I've told people since my very first student loan video, you're better off just continuing to pay and see what your options are down the line rather than just stop paying and thinking that Biden's going to forgive everything, which happened for some people, but for a lot of people, it didn't. You literally have millions of people right now that haven't made a single payment on their student loans since the beginning of the pandemic. And so people like that, they don't have access to the save plan, which was supposed to ease them back into repayments. They believe we're going to see defaults on student loan payments double in 2025 from where they're at right now. And basically it's because people don't have a viable or affordable payment option. And there are a lot of borrowers who are going to fall through the cracks. So this is yet another looming financial crisis that we are going to be facing in 2025. And this is why if you're in this situation, guys, just like people who are facing foreclosure on their home and can't make those payments, you need to talk to your loan servicer. You need to figure out what kind of repayment options are going to be available to you, because a lot of those options are going to be better than just doing nothing and watching your wages get garnished. That's going to be worst case scenario. You never want these financial institutions to take matters into their own hands, right? Then that's always going to be worst case scenario for you. Just like if you don't pay your home insurance and you have a mortgage on your house, when the bank puts forced place insurance on your house, you're going to be paying a much higher insurance rate than you were before with no coverage available to you. It only covers the lender. It's a real raw deal for the homeowner. Just like this is going to be a real raw deal for a student loan borrower who refuses to do anything about this problem. Now, one of the things that you could do if you're somebody who's struggling with your student loan debt, if you see a chance to do this, which isn't looking too likely with the trajectory of interest rates right now moving into 2025, but at some point in the future, you might be able to refinance your student loan and potentially lower your payment just like any other type of debt. But before you do that, you need to make sure you fully understand the consequences. Just like there were consequences for not paying the loan, there could be additional consequences for actually changing your loan from a government-backed student loan to a private lender. There may be some things in there that you need to be aware of that are changing. Here we have the Real Estate Magic Money Printer. Okay, this house was sold in 2012 for $875,000, probably demolished the previous home, rebuilt this one. And then they actually listed it for sale, $1.2 million back then, probably trying to flip the previous home until they actually built this one. And then fast forward to 2022, they're asking $65,000 a month in rent. And now $75,000 a month in rent this year. And then they listed it for sale back in 2023 for $15.5 million. So all you got to do is buy a house for $875,000, and then you can have a house worth $15 million. Oh, and by the way, this is your next door neighbor. So whenever you pay $15 million for the house, this is what you get to live next to, the Adams Family House. Now, one other thing we have to talk about is the lies that are happening right now with the job market, okay? There was a story recently that came out from MarketWatch talking about how the jobless claims are showing no rise in layoffs in 2024, which we all know is a big fat lie. They say that the number of Americans who applied for unemployment benefits in the week before Christmas slipped by 1,000 to a four-week low to 219,000. They say most businesses have enough demand to hold on to existing staff, and they are unwilling to cut jobs amid a persistent labor shortage. Well, tell that to Big Lots. Tell that to Party City. Tell that to FedEx. Tell that to all these other companies that are going to be getting rid of thousands and thousands of employees, tens of thousands, if not hundreds of thousands, when these layoffs actually happen. In the meantime, you had the amount of people collecting unemployment benefits climb by 46,000 up to 1.91 million people, which is the highest level since 2018. So they're sitting there talking about, oh, the jobless claims are low, but here we have unemployment benefits being paid out at the highest level since 2018, guys. The only reason it's highest since 2018 is because they omit the data from the pandemic because they consider that an anomaly. So even though we had more people on unemployment then, that doesn't count. So they say that the recent trend of slower hiring and low layoffs is likely to continue through the early part of next year. So let me make a correction. You're going to see the trend of slower hiring and a lot of layoffs continue that trend into next year because that's what we've seen so far this year is a lot of layoffs, not low layoffs. Now, the only good news here is that a lot of companies are optimistic about Trump's economic policies. But, of course, there's a lot of wild cards that could be thrown in there, too, that can throw a curveball with everything, like the tariffs, as well as this student loan debt crisis we're facing right now, people losing their homes, people defaulting on car loans. There's all sorts of things happening out there, and those defaults are just on the rise. They're not going down. They're talking about how the jobless claims are low. Just look at what we talked about the other day, guys. Over 2,200 stores closing nationwide between Party City, between Big Lots, between probably the Container Store shortly after them. And the problem is these people haven't actually lost their job yet, right? Those stores are still open for now. But by the middle of next year, all of those stores will be closed, and all of those people will be out of work. So the problem is they haven't actually lost their job yet, and the mainstream media keeps running news stories like this to make everything look like it's fine and not taking into consideration all of the layoffs that haven't happened yet but are going to be a guarantee. But here's the thing. People who watch this channel, they know that this stuff is coming down the pipeline, and it's happening right now. And you also have to think about all of the people that aren't filing for unemployment because they've already been on unemployment for too long. They're no longer eligible for unemployment, so they fall off the unemployment numbers. So if you're somebody who's been unemployed for over six months, you fall off the unemployment numbers and act like you don't exist. And a lot of people who lost their job six months ago could very well be in this situation and still be out of work, but you're not being technically counted anymore, which is a huge problem. So before you believe any of these feel-good stories about the economy, look into it a couple layers deeper, and you'll probably realize that a lot of it is built on lies. And if you're somebody who's in a bad situation with your credit, with your student loan situation, you need to get it sorted out, guys, because the longer you wait to get these problems sorted out, the longer it's going to haunt you, the more financial trouble it's going to cause you in the long run. And you're just really doing yourself and everybody you're involved with a big disservice. If you get married one day, your spouse is going to inherit your financial troubles. You really want that for them or your future family or anybody? Just like any other problem, it's always easier to fix it when it's a smaller problem than when it becomes a bigger problem. So if you enjoyed this video, make sure you subscribe to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here, and I'll see you in the next one.