You Signed a $1,800,000 Loan with a 25% Prepayment Penalty?!
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- Опубликовано: 27 фев 2022
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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 💯
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 🤣🤣🤣
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.
I think the caller has misunderstood the 25%. It’s 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 aren’t helping… they just have Ramsey tunnel vision 🙄
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.
This is the kind of guy who will try to blame anyone else for anything that happens to him. *Bumps into kitchen counter* “Whose bright idea was it to put a kitchen counter right here in my way?!?”
...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 ½ years to pay off if he threw in all $20k a month, and by then something might go worse to impact that income.
I swear, some day Dave is going to have a heart attack on air listening to one of these crazy calls
😂😂😂
😂😂😂😂
I’m cryingggggfgtt
🤣🤣🤣🤣🤣
Rumor has it they've got medics on site just in case🤣
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.
I can’t even wrap my head around loans this big. Need more regular poor folks content! 😂
I know more rice and beans up in here!
Sweet rack 👍
@@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. What’s new.
@@veritatyson6317 did f
No loan - No “thing to look for.”
I never know about prepayment penalty. Good thing none of my loans has that.
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
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.
At 2.3% interest, he would be dumb to pay it off early
Calls like this make me feel much better about my 60k income to 25k debt lol
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 don’t do it.
It isn’t the governments jobs to stop someone’s else’s 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
That penalty works out to $450k. Ouch!!!
Either way he’s 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 he’s put that 1.8 million to work for him and it’s barely costing him anything
Caller, all the comments are hating on you.
A $1.8m loan fixed for 20 years at 2.4% is incredible. It’s cheaper than inflation. And if inflation persists, it makes your loan even better.
Just focus on making your RV park a success, don’t 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
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.
I didn't know you could take out loans that big. 😆
This is just beyond brutal.
They're called Jumbo Loans in the banking industry.
Loan officers l-o-v-e the commi$$ion$!!!!! 💸💸💸
@@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
🤔 What was that caller thinking? ….. Answer he was not! ….. My dad always told me you have to use your head for something besides a hat rack.
This might get on the top ten craziest calls list of this year.
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
Followed Dave Ramsey, stopped following Dave Ramsey, and then does the biggest mistake I have ever heard. Wow!
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...
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!
Good Lord! Who pays off a 2.3% interest rate loan early? And why would you want to the "CHEAPEST" rate nearly possible.
The only reason I fallow this channel is to remind myself how lucky I’m 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 wouldn’t 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
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
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.
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 don’t 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 he’s likely making $1mm+ per year. This should be a breeze for him long term.
@@RomilCPatel then why would he call in? 😂 he’s not making a million a year
Gas 4.19 a gallon now here in my town 😂
All I can say is, “WOW!!”😱
I threw up my hands when he said he took this step because it rv parks were "trending". OMG!!!
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.
It's pretty amazing how quick Dave can find a solution.
It's always easy to tell others what to do.
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.
?????? 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.
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?!"
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.
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 it’s likely the bank will want the money paid off assuming rates will rise. This is an SBA loan though so it’s really the tax payer that he’s bending over.
@@andidede3653 My cell phone plan has a pre-payment penalty
4:15 … we are now over $5. ouch
"Do you have any money?"🤣
crazy terms
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 !
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...
John is such a great host
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
They should build a water park at the RV park. Take out another loan.
🤣🤣🤣🤣
What a smart move. Congrats sir.
He tried to pull the "See, the government is evil" comment -- which FWIW, usually hits home for Dave and got burnt like toast.
That interest late is less than inflation….
Hey Dave. We got out of debt to get into even bigger debt.
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.
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
The silence after the caller states: "1.8 Million" LOL
When they say BUT you know they messed up!! 👀👀
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.
Pre payment is actually cheaper than the interest of you ignore the time value of money completely lol
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.
Geez man!
Either he pays 36k a year in interest for the next 10years totaling 360k or he pays 450k now to get out early. 😬 ouch is right both options are painful just to say cant imagine doing them
All while probably making 50k a month.
True, I don’t 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
gas here in hawaii is 4.56 right now.. It's almost heartbreaking lol
LOL, gas is through the roof and rates WILL be going up this year. Poor guy
DEEBO was the loan officer 🤣🤣
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.
So much for taking the baby steps for this guy in the past. He is now neck deep in debt.
You took out the loan, so be prepared to pay it. SBA didn't force you to do this.
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 years…….Wife and two teenagers here………
Lol, do u regret the wife or the kids? Maybe both.
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 wouldn’t worry about prepaying a $1.8mm loan locked at
What drugs are you on I want some
Take whatever cash you have and find a small island off the grid 💨
Nobody.. ever!!now of days wants to take responsibility for their own actions.. it’s always somebody this or, others that🤦🏾♀️
So not ever?
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.
Dave tilts his head at building an RV park because it's the trend 😂
Can you pay a good chunk of it off and make the payments till the end or is this a no payment loan
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.
2:35 don't blame others for your poor choices.
It's in his language the dissocation between the consequences HE will face and the desire that he hopes to experience.
The collective silence before the “OOUCH!” was amazing
“The loan is for 1.8 million.”.......……...................................👀.............................👀..................”OOUCH!
Whoa NELLY! That's the craziest loan I ever heard of.
Clicked on this so fast!! 🤯
It's fine. Keep your money. The reality is keep the money so you can make monthly payments
I’m speechless
Read it as, “you WHAT!”
With the interest rate and length of loan it’s 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.
Where do people get these ideas ?
Lord have mercy! That’s I can say about this.
Brother's gonna eat the disaster he made for himself lol
1.8 million dollar loan for RV park because it "seems like kind of a trend". That is some serious research.
All I want is a job over $35,000….cant win for losing That kind of money is beyond my comprehension
How on earth is this legal to lend a loan in that manner ? this is ruthless
Wow. A bad idea executed at the worst possible time. Truly amazing.
Doesn’t make sense to make a prepayment penalty higher then the interest. Might as well set it the same as interest so you won’t make any less money (even more if you count inflation) but people would still pay it off earlier
I hope the RV park makes money
This is nuts
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? That’s 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.