You Signed a $1,800,000 Loan with a 25% Prepayment Penalty?!
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Repeat after me: Being approved for a loan does NOT mean you can afford it.
Yes! A lot of people do not understand this.
Yes
So true đŻ
I mean it kinda does, but that loan is about the only thing you're going to be doing.
@@dedalliance1 that means you cannot afford it lol
We had a $150 pre-payment penalty on a car. We couldn't get the bank to wave it when we wanted to pay off the car, so we paid the balance down to $1, then paid the interest on the $1 about a year later. They paid more in postage sending us statements than what we owed. I think the payoff was $1.14 if I remember correctly.
Smart. He should do this đ€Łđ€Łđ€Ł
This is brilliant. I'll be shocked if they don't close this loophole soon
I did this years ago down to a penny when I was 21. Hilarious reaction from the bank.
@@reviewsgoodnbad7695 we discussed doing that too! We did get a funny look from the teller when we paid it off in change.
I like your style!
We followed the baby steps, except for the $1.8 million loan with a ridiculous prepayment penalty.
If you want to know why lawyers want you to talk to you before you sign the papers, this is it.
I invest in a lending company. They do not have a prepayment penalty on any loan because they believe those are scams and unfair to the borrower.
There's always the bankruptcy option.
Amen!
Whenever the caller starts with "we followed the baby steps" its a guarantee they made a stupid decision that completely contradicts the baby steps
I mean, the guy admits he understood the penalty before he signed. Not sure the lawyer would have helped.
This is the kind of guy who will try to blame anyone else for anything that happens to him. *Bumps into kitchen counter* âWhose bright idea was it to put a kitchen counter right here in my way?!?â
...and why wasn't it made of bubble wrap? I'm gonna sue!
"Have that removed"
Honestly I think this guy called the show to brag. Yes his main question was what to do about the prepayment penalty but they didn't even ask him how the business was running. This caller could be making $20k plus a month after all expenses and living the good life.
But also, chose a stupid path
@@abrahamflores2566 That would still take 7 œ years to pay off if he threw in all $20k a month, and by then something might go worse to impact that income.
I think the caller has misunderstood the 25%. Itâs likely not a 25% penalty. There is probably a small penalty if you prepay MORE than 25% of the balance early. He needs to read the loan agreement again and maybe get an expert opinion on this situation.
LOLLLL. Imagine being so dumb or maybe erroneously ignorant than you interpret such a collosal mistake. But based on the other information in this guy's call & story, such a mistake seems plausible. LOL. Good grief. Get a better handle my man in Boise!
Yes. He needs to pay for some actual help. This call is depressing. Clueless
Agreed. And dave and John arenât helping⊠they just have Ramsey tunnel vision đ
I think he is clueless already. Running an RV park isn't the trend. The trend is buying an RV and living in it. Running an RV park is tough to just pay the Bill's with, muchless turn a profit.
I swear, some day Dave is going to have a heart attack on air listening to one of these crazy calls
đđđ
đđđđ
Iâm cryingggggfgtt
đ€Łđ€Łđ€Łđ€Łđ€Ł
Rumor has it they've got medics on site just in caseđ€Ł
I canât even wrap my head around loans this big. Need more regular poor folks content! đ
I know more rice and beans up in here!
Sweet rack đ
@@MartianAmbassador69 amen brother
@@charlesyoung9980 a fellow man of culture, cheers brother.
That escalated quickly
This one's going to be good. Pre-payment penalty is one of the things you look for in any loan paperwork.
He did. He understood the terms of the contract before signing it.
.
Another case of dumb people doing dumb things. Whatâs new.
@@veritatyson6317 did f
No loan - No âthing to look for.â
I never know about prepayment penalty. Good thing none of my loans has that.
i like how they make people see the error in their ways and tell them to take ownership. no one did this to you, YOU did this to you.
This loan makes student loans look weak in comparison, this repayment penalty is bonkers in and of itself
This loan is creating income atleast. Student loans just drain you
Hi I have a company I can give u high interest loan with very high prepayment penalty
That penalty works out to $450k. Ouch!!!
Either way heâs going to pay extra but hey⊠you signed it!!
Which is pretty close to the amount of interest on this loan for 10 years. The loan shark will get their $450K no matter what he does.
Wow thanks for the math genius
Yeah dude, we all watched the video too.
Well the good part is heâs put that 1.8 million to work for him and itâs barely costing him anything
At 2.3% interest, he would be dumb to pay it off early
cant believe they gave him a 1.8 mill loan with not much liquid cash on hand. I guess the business must be worth a lot and he must have his house on the loan, and maybe a huge retirement also.
He has to have really good cash flows for Commercial loan approvals. They didn't ask how much he makes but I would estimate 15k- 40k a month.
Or use his properties as collectorals. Banks are not that dumb.
Prepayment penalties should be illegal. They should of negotiated that out of the deal.
...should have...
Like Dave and John mentioned no one is putting a gun to your head and forcing you to do this, so just donât do it.
It isnât the governments jobs to stop someoneâs elseâs ignorance.
@@RomilCPatel exactly. So they gonna take my guns always since that crazy dude use the same gun to kill someone?
Oh nonsense. You can negotiate a lower fixed interest rate in exchange for a prepayment penalty.
you think there are no costs to lending $$...Braindead
Calls like this make me feel much better about my 60k income to 25k debt lol
I didn't know you could take out loans that big. đ
This is just beyond brutal.
They're called Jumbo Loans in the banking industry.
Loan officers l-o-v-e the commi$$ion$!!!!! đžđžđž
@@raallen1468 no this is a commercial loan and you only get approved for them when you have big cash flows. This caller is likely making $15k plus a month
and it's SBA at that!!!
@@abrahamflores2566 more probably around 25 k
25% is how the Gov't pays for free stuff
This call doesn't make a whole lotta sense to me. He has a loan at 2.38%, which is a really good rate. He can pay it off early, but no earlier than 10 years. The RV park is generating some level of income I presume. Neither Dave or Dr. John seem to care about this at all. To me, that is the most important thing - how much is my investment making and can it pay all the bills? That's all I care about. They are obsessed with the early payment penalty on the loan. To me this is irrelevant. If the park is making money, he just keeps making the monthly payment. No big deal. And if the park is losing money, he can't pay it at all so the thing is going bankrupt. The prepayment penalty really has no impact in either scenario, other than perhaps some peace of mind one might get from having paid it off early.
Bingo
Agreed. You're looking at it from a cashflow angle. Businesses do that all the time, and for an asset that makes a profit, in my view this is the correct angle to approach it at.
It's always safest to aggressively pay down debt into a 10-30% range, though. Then your assets become a lot more unsinkable. But with cheap debt like that, I would do the "build up assets on the side" approach over actually paying it down.
Instead of worrying about the prepayment penalty, just put the money you'd be putting towards it in an index fund and in ten years when you can pay it off do it then. This isn't a crisis, lol. The problem isn't the repayment schedule.
I agree, and why is he worrying about prepayment penalty when he says he currently has no liquid cash.
đ€ What was that caller thinking? âŠ.. Answer he was not! âŠ.. My dad always told me you have to use your head for something besides a hat rack.
Followed Dave Ramsey, stopped following Dave Ramsey, and then does the biggest mistake I have ever heard. Wow!
If it only cost him 1.8 million to build an entire RV park, it must not be very big, or not have nice amenities such as concrete, pools, playgrounds, etc. I hope that when it gets slow, they will still have enough revenue to cover their expenses.
My RV is for sale for this reason! Gas is way too expensive right now to tote
YIKES, what are they going to do when people go back to the norm and no one is going to his RV park anymore, and he cannot pay the bills... They were doing so well, until...
I'm sorry, but there is no way I could sign up for a loan w/ 25% prepayment penalty, not even just 1%, I hate the idea of prepayment penalty. I don't care how much potential it will bring in my profit, you just can't foresee that and just too much risk upfront.
Owns several pieces of property free and clear yet decided to do this?
Amazing how greed wrecks things and he was probably living on easy street
How do you think he owns those properties in the first place? He financed them first then paid them off. This guy is likely worth couple million already
@@abrahamflores2566 you donât know that. He said he followed the rules. Plus the real estate in Boise has skyrocketed
@@mxerb5912 well nobody really knows the math since Dave didn't ask him. Dave just freaked out at him. He could be making $50k a month or 10k a month after all expenses. Yeah the prepayment penalty loan was a bad idea but if it was a loan without that I would not be freaking out
@@abrahamflores2566
Based off of the figures is giving heâs likely making $1mm+ per year. This should be a breeze for him long term.
@@RomilCPatel then why would he call in? đ heâs not making a million a year
Caller, all the comments are hating on you.
A $1.8m loan fixed for 20 years at 2.4% is incredible. Itâs cheaper than inflation. And if inflation persists, it makes your loan even better.
Just focus on making your RV park a success, donât prepay the loan, and you will be very wealthy.
Someone that understands money here. So many are screaming the sky is falling. No clue he has been handed a gift.
Exactly its also not an SBA loan sound like a swap
Gas 4.19 a gallon now here in my town đ
This might get on the top ten craziest calls list of this year.
2.38% is so low
Thats why they have the prepay penalty
The loan is only 10 years
That's lower than I was offered by Sallie Mae for school.
The only reason I fallow this channel is to remind myself how lucky Iâm to be able to use the 10% of my memory
$1.8mil bag of mistake , should have payed attention in math class.
It is not the math, it is the fact that he knew the prepayment penalty term and still signed on.
@@jml9550 still math , If he knew what he was actually paying at back end he wouldnât have done it
@@kingshomes8546 Good point. He is then better off invest that money in a good mutual fund then pay the penalty.
@@jml9550 agree
This is probably the WORST debt call (yes this beats the $1M student loan debt of the orthodontist caller). This is like putting nail on your own head and ask for someone to pull it out because it hurts.
1.8 million in debt with likely 3-5 million in equity. He is doing far better than you.
Please explain how it is so bad? 2.38% interest on the loan. Invest the profit and it makes more than the 2.38%. Win-win. Someone want to give me a loan for 2.38% I would take it all day and invest in another project or investments.
for a 2% business loan? Sure I would accept the 10 year prepay penalty on FREE MONEY... whats the issue here? WHY PAY IT OFF EARLY? inflation is higher
You know Dave is totally losing it on the caller when instead of the usual household income question, he goes "Do you have any money?!"
Good Lord! Who pays off a 2.3% interest rate loan early? And why would you want to the "CHEAPEST" rate nearly possible.
Several RV parks in my area was not effected by the pandemic. Because a lot of ppl lost therehomes and needed a place to go. It's often cheaper to borrow an RV and rent a spot to live PERMINANTLY till things blow over. If you allow that. You will be fine. Save your $$$$ tven pay off the load in ten years.
I'm in Florida there isn't a free spot available at any RV or camping place to be found everybody and their mom has completely booked them all up and then some it's absolutely crazy... Is regular normal Florida people can't even go on vacgo on staoccasion or take their kids camping anymore because there's just no spots everything is so booked out
Not to mention with people "working from home" some people have chosen to make that home mobile. RV Parks are heavy hitters right now.
@@rebeccakepner8489 I figured as much. That's why I think Dave is WRONG in his assessment of the man's buisness.
?????? Here in my city, $5000/yr up front for a space, there are 400 spaces = $2MM/yr
hundreds of people on the waiting list,
The other parks that were $3600/yr are now $7K/yr
In the mid 80's, I signed a 30 year lease, in the Bay Area for my space.
at 12 years they offered a buyout, space rent quadrupled.
They saw him coming a mile away. The funny thing is, he sounds stereotypical of a trailer park resident, "Honey, I got this great idea that's gonna make us rich!"
Simply Brilliant!
Either he pays 36k a year in interest for the next 10years totaling 360k or he pays 450k now to get out early. đŹ ouch is right both options are painful just to say cant imagine doing them
All while probably making 50k a month.
True, I donât know how much cash flow this business is bringing. Could also be seasonal business plus the fuel price up and everything going on today.
I'll take the 360 large over ten yrs because the value of the dollar will be less going forward. Thereby, be pays back in "cheap dollars". Not a guarantee but that would be my choice! If he has 450K now which he does not put it in an investment veh and hopefully double it to 900k at least in 10 yrs
Or he just pays his note and makes money on the arbitrage like he intended on in the first place
I would be surprised if the loan actually has the prepayment penalty at 25% written in the document. More than likely it is on a yield maintenance in which the prepayment penalty will drop as interest rates increase.
Which is SBA policy
Apparently the gas prices aren't affecting people traveling lol. As a truck driver, the roads are packed with people still driving and the RVers aren't going anywhere. In fact I see more RVs because of the state of our country. I think more people are getting RVs to have mobility.
Not just mobility, many people are being squeezed out as renters. Rent increases is more of an issue than increased food & fuel prices.
This lender heard about Dave Ramsey and created and paid many consultants to come up with a Ramsey proof product.
"What if we charge them 25% if they pay it off early?!"
I honestly believe that this will be the future when it comes to financing anything. You want to buy a car and want to pay it off after 30 days, sorry, 25% prepayment fee. More reason to buy things cash. I hope I am wrong.
@@andidede3653 It's one of things that seems outlandish, and almost comical in it's exaggeration when saying it.. but sadly, it's a real possibility. More sadly, there will be people that still go for it anyway. I hope it doesn't get there though.
In a few years itâs likely the bank will want the money paid off assuming rates will rise. This is an SBA loan though so itâs really the tax payer that heâs bending over.
@@andidede3653 My cell phone plan has a pre-payment penalty
It;s so weird listening to Dave Ramsey's radio show and Dot in The Sky by Drab Majesty or Sonic Youth is playing as his bumper music.
I threw up my hands when he said he took this step because it rv parks were "trending". OMG!!!
"Do you have any money?"đ€Ł
It's pretty amazing how quick Dave can find a solution.
It's always easy to tell others what to do.
The interest rate is only 2.38%. Why not just put the profit in index funds (even a bond fund currently is probably more than 2.38%). Pay it off after 10 years if you wish.
All I can say is, âWOW!!âđ±
There are a massive amount of people who stopped living in a house and now live out of a RV full-time like me. I see no issues just save the remaining balance in cash like Dave said and relax.
I guess you do have kids yet?
@@jml9550 no thank god
@@yuriypono3666 enjoy life bro. I wish I can go back 20 yearsâŠâŠ.Wife and two teenagers hereâŠâŠâŠ
Lol, do u regret the wife or the kids? Maybe both.
4:15 ⊠we are now over $5. ouch
Out of debt and took out a loan. Some people never learn.
And did no math!
@Alina Tamashevich Saul the Troll loves telling people that debt is great!!
@@jimroscovius Amongst other terrible advice he doles out. Would love to see his bank statement.
@@alinatamashevich3354 Who? Some comment must have been deleted...
He tried to pull the "See, the government is evil" comment -- which FWIW, usually hits home for Dave and got burnt like toast.
You took out the loan, so be prepared to pay it. SBA didn't force you to do this.
What is the problem here? Caller has a loan with 2.x% rate over 10 years. I would never pay that off early. Is the loan not a fixed rate? Thatâs the only scenario where I can see the prepayment being a problem.
The problem here is even if the interest rate is fixed, agreeing to a 25% prepayment penalty is insane by any standard (especially considering the high principal amount and the long maturity of the loan). Essentially the borrower volunteered to guarantee a cash flow to the lender and at the same time limiting his own financing (or refinancing) options. Also, the 'low interest rate' is deceiving in this case - at the end of the day, the interest amount is not just determined by the interest rate but also by the loan principal.
@uberboiz don't prepay the cheapest mortgage rates in history. This guy would be a fool to tie up all his capital paying down a 2.38% loan.
crazy terms
Hey Dave. We got out of debt to get into even bigger debt.
The silence after the caller states: "1.8 Million" LOL
Can you pay a good chunk of it off and make the payments till the end or is this a no payment loan
John is such a great host
yea people don't travel with gas the way it is unless you own a rv park that is next to a plant that has a turn around for a year and the rv park is full cause around here in Louisiana rv parks are packed but mainly from workers ! I drive past one every day and the same rv's have been there for a long time !
Man, thats the worse. Thats the first thing I look for in a note after the rate is that ppp, but that ruins the deal. Because I'll be trying to pay the thing off early lol.
He made a good business decision. Great interest rate. He has a bundle of cash flowing in from his business. He is a multimillionaire with high income not only from the RV park but from the several properties he owns outright. Wise businessman.
I certainly wouldnât worry about prepaying a $1.8mm loan locked at
What drugs are you on I want some
Pre payment is actually cheaper than the interest of you ignore the time value of money completely lol
That interest late is less than inflationâŠ.
The minute u make Dave put his head on his hand, u know you've messed up big time. Lol
Except you probably don't see it.
DEEBO was the loan officer đ€Łđ€Ł
Nobody.. ever!!now of days wants to take responsibility for their own actions.. itâs always somebody this or, others thatđ€ŠđŸââïž
So not ever?
Can you pay off 90+% of the loan right away and then let a small percentage live on until 10 years? So you donât pay much interest or the penalty? Or do prepayment penalties dictate monthly payment maximum limits?
That's a good question
I donât think he has 1.62M laying around
When they say BUT you know they messed up!! đđ
They should build a water park at the RV park. Take out another loan.
đ€Łđ€Łđ€Łđ€Ł
Great explanation in terms of mathematics, good content as always.
Dave is completely out of his league has no idea what he is talking about
You know it wasn't until the comment about gas prices, that I realized they were talking about an RV park and not a trailer park.
It blows my mind that people that can actually qualify for these loans⊠are also dumb enough to take them.
This caller is richer than you
I would take the loan in a heart beat lol not everyday you can get a fixed rate like that for 20 years
gas here in hawaii is 4.56 right now.. It's almost heartbreaking lol
I was curious how much he makes and how much he pays. If he brings in enough to set a bunch aside (which would have been used to pay it off early), and that money were invested instead (maybe in one of Daveâs doubling every six years mutual funds), seems like heâd do okay.
If it earned enough to pay for itself early, he's going to be fine. In the world of business, you'd be stupid to pay off a 2% loan early. A lot of people (who don't listen to Dave) apply the same thinking to their home. The only reasons not to are risk that something unexpected will happen, and the feel good factor of having a paid for house. Neither applies much to a large business, but this caller has put his personal finances at risk by building the park without actually being a large business.
Brother's gonna eat the disaster he made for himself lol
Dave tilts his head at building an RV park because it's the trend đ
LOL, gas is through the roof and rates WILL be going up this year. Poor guy
Take whatever cash you have and find a small island off the grid đš
The collective silence before the âOOUCH!â was amazing
âThe loan is for 1.8 million.â.......âŠâŠ...................................đ.............................đ..................âOOUCH!
2% is cheap money. 7K a month.. The most of the interest is deductible. In the US, we have the cheapest money to lend on the planet. Don't look at this as a bad investment. The U.S. Small Business Administration (SBA) 7(a) loan has a prepayment penalty if the loan term is longer than 15 years and the borrower voluntarily pays more than 25% of the outstanding balance within the first three years. The penalty is 5% of the prepayment amount in the first year, 3% in the second year, and 1% in the third year. After 36 months, there is no penalty. Loans with a term of less than 15 years do not have a prepayment penalty.
With the interest rate and length of loan itâs not terrible but that prepayment fee is ridiculous
Interest rates are rising. If they don't waive the prepayment penalty to get out of lending him money at 2.38% they're crazy. If I were the caller, I might be glad I had such a low interest rate. I don't view business debt the same as consumer debt. I know Dave does but I'm not a Ramsey devotee even though we are now debt free.
Agreed. Debt like that is "good debt" if your ratios don't go out of whack. If he has other assets, that huge loan might only put him at 40% debt:equity, which isn't the end of the world, and if they aggressively invest to the side and get ready to pay it down later, they could end up with a far better ratio in 10 years. They might have $1.1m remaining, yet have $8m in equity/investments by then (homes/rentals, the RV park, ETFs and mutual funds, etc.); a ratio much closer to 10% debt:equity.
If you want to retire wealthy, since our financial system favours borrowers, your best bet is to aim for a debt ratio in the 10-30% range. When you fall too low, look for another project to buy (on debt, at a good rate) and then aggressively pay down (or build assets to offset) - note that when you buy a home, your debt ratio is 80%. This is well above the healthy range... and for almost any other asset, no sane lender would let you borrow that much relative to the value of the asset.
Repayment clauses are illegal on my country, and I am living on a third world country, the fact that banks can get away with such things on the USA is kind of depressing.
@D C Really? Well, yes, nobody forces people to sign, still there is laws to protect common people from entities like banks and corporations which wield too much power.
@@cesaravegah3787
They donât weld too much power. No one is forcing you to sign. Just donât be stupid and sign such a thing.
@@RomilCPatel Ok, just remember that not all people is as smart and have so much foresigh as You and again, there is laws to adrees such issues.
@@cesaravegah3787 You just have to be smart enough to hire an attorney. And this guy still should. There's no way this loan has a 25% prepayment penalty.
So much for taking the baby steps for this guy in the past. He is now neck deep in debt.
Clicked on this so fast!! đ€Ż
It's in his language the dissocation between the consequences HE will face and the desire that he hopes to experience.
Read it as, âyou WHAT!â
2:35 don't blame others for your poor choices.
Whoa NELLY! That's the craziest loan I ever heard of.
Wait...so this guy has to LITERALLY become a millionaire...just to be cleared of this this debt? Wow.
That gas is only going up under this admin.
1.8 million dollar loan for RV park because it "seems like kind of a trend". That is some serious research.
isn't prepayment based on the re conveyance of the note. Can they not just pay it down incrementally as long as its not completely paid off within the first 10 years.
Gas is already $5 in California. Rest of America must be really bad off if they canât afford $4 per gallon.
Where do people get these ideas ?
Hi ramsey
The gas going to 4.50 a gallon really aged wellâŠ