The Ramsey Show - App - How Can I Help My Girlfriend Pay Off Her Loans? (Hour 2)

Episode Date: April 5, 2021

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🎵 Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. Anthony O'Neill, number one best-selling author of the book Debt-Free Degree, Ramsey Personality, and host of The Table, a big-time, exploding podcast and YouTube show where you can call in and participate in the conversation around The Table. The phone number here, if you want to talk to the folks at this table, is 888-825-5225.

Anthony and I are here to answer your questions about your life and your money. 888-825-5225. Anthony and I are here to answer your questions about your life and your money. 888-825-5225. Adam is with us. Adam is in Lake City, Florida. Hi, Adam. Welcome to the Ramsey Show. Hey, Dave. Hey, thank you for taking my phone call.

Our pleasure, sir. How can we help? I am currently on Baby Step 2, and out of all my debt, my vehicle is over 50% of it. So I am trying to sell it. I'm thinking about selling it. What do you owe? However, it's the end of my, it's the highest thing on my debt snowball. It's the last thing I'm going to pay off.

What do you owe? I owe $17,400. And what's it worth? About $ the few the few people that i've reached out to for a quote have been quoting me between 12 and 14 okay so that's a wholesale at a dealer right they're trying to buy the card wholesale correct so if you look up kelly blue book kbb.com for private private sale, if you put it on Craig's list, that means it's going to bring $15,000. Yeah. I believe Kelly Blue Book is running $16,000 to $18,000. There we go.

Yeah, we're $1,400 off that. All right. So what's your income? $40,800. Not including my side hustle. You said $40,800? Usually, yes, sir. Okay, so $41,000. All right. And then you've got a side hustle. You said $40,800? Usually, yes, sir. Okay, so $41,000.

All right. And then you've got a side hustle that makes you what? Roughly $2,000 a month. Okay. Two rules of thumb we use. One is, is the value of your vehicle more than half your annual income? You do not violate that, but you come close. Yep. violate that but you come close yep number two can you be 100 debt free if you keep this thing

other than your home within uh two years and you probably can do that yes sir i think my date is july of 2022 just with your side income you can probably do it this year yeah Do you like the car? I don't like the payment more. No, I know, but do you like the car? Yeah. Not really. I mean, it gets me by. That has to suck, making a car payment on top of something you don't even like. Man.

Yeah. Well, that might be reason to move down. Let me tell you why I came up with the two-year thing. And let this, you percolate on this. And, Anthony, you join in. Okay. But my reasoning is if the car is going to keep you in debt for an extended period of time past the two-year, you're trying to run a race with ankle weights on.

Okay? You're not in that, but you're carrying a fairly heavy weight. You've got one brick in your backpack anyway, right? And so you've got something to carry here because you're going in that, but you're carrying a fairly heavy weight. You've got one brick in your backpack anyway, right? And so you've got something to carry here because you're going to make it. But like you said, it's half of your debt, and you can clear that on something you don't even like that much anyway, then I might do that. Now, here's the reason. I try to project this out just past because we don't get people out of debt

just for getting out of debt. We get you out of debt so you can become wealthy. And guess what happens as you become wealthy? You're going to move into a better car okay so if you move down out of this car into a into a beater and 18 months from now you move back into another car that you pay cash for of similar price which is really about the schedule you would be on uh it really was it was you it really was kind of just a little two-step here. It wasn't like a big deal move. Now, if you told me you're making $40,000 and you owe $50,000 on the truck, sucker's gone.

Blow it up. I mean, it's done. Okay? You completely screwed up doing that. But that's not your case. What kind of car is it, Adam? It's a truck. It's a Chevy Silverado. I mean, that's a truck it's a chevy silverado so oh i mean it's

a good that's a good car though yeah nothing wrong with that truck yeah nothing wrong but he doesn't like it so yeah i'm with the whole the whole idea is if you're going to turn around around 18 months later move back up anyway and you like the car then i would say fight through and keep the car but you don't like the car so you're going to move out of the stupid thing in 18 months anyway once you're dead free you're probably going to move out of the stupid thing in 18 months anyway. Once you're debt-free, you're probably going to move out of it, right? Correct. Let's go ahead and move out of it now and accelerate debt-free then. I agree.

Now, what's the other debt, though, Adam? I'm sorry? What's the other debt? Credit cards and some personal loans. Okay, cool. Great. Yeah. Sell the car, man.

Go ahead and sell the car. Now, once you sell the car, do you have cash to buy another car? Yeah, you've got to get a little cash set aside for a beater, yes. Right. That was going to be the follow-up question. Yeah, you push pause on your baby step two, pile up some cash to transact this. Right. Okay.

Now, how do I go about deciding what price level I need to be saving up for? I mean, I understand it's a beater and everything, but... A couple of grand. A couple of grand. Yeah. Okay. And it may not be a truck, Adam. What's your side hustle?

I deliver groceries through a company, an online company. Are they requiring a certain age of car? No. Okay. They just require reliability. Correct. Yeah. so two to three grand yeah two to three yeah because this is not a car you're going to keep it has no sex appeal but has reliability it's a car you give a name to okay old blue got me through when i was getting out of debt

and delivering groceries you tell your grandkids this story someday i'm back in the day i had old blue right yes sir and take pictures of it because you want to remember the sacrifice You tell your grandkids this story someday. Back in the day, I had old blue. Right? Yes, sir. And take pictures of it because you want to remember the sacrifice. Absolutely. I wish I had pictures of some of those crap cars I drove when I was straightening this stuff out, man. Trust me. I got mine.

It motivates me. Yeah. But that's what, yeah. So you hear all the different variables. Variable number one, he doesn't like the car. Variable number two, it's half his debt. Variable number one, he doesn't like the car. Variable number two, it's half his debt. Variable number three, he doesn't like the car. So, yeah, he's got a good side hustle.

So, yeah, bust it. Pile up three grand, four grand, $1,400 to cover the whole. Three grand to buy you a little something. And then put this thing on Craigslist, get her sold. And don't buy something until you get her sold. Yeah. And then just work like crazy to get out of debt while you're waiting to get it sold when it sells don't give it away we're not trying to sell do not sell it for wholesale there's no reason you're not about

to be repoed so don't give away don't sell a sixteen thousand dollar truck for twelve thousand to a dealer right and create another four thousand dollar problem for yourself there's no point in that the dealer's not doing anything wrong they're just trying to make a living but they they buy cars cheap so they can make a make a profit when they resell them. They don't buy them at retail. And let me say this to America. I know you probably hear some of you all who are new to us. Dave did not say skip over the small debt and go pay off the car.

No, I did not. No, I did not. What he's saying is still work the baby steps, but while you're working the baby step method, paying off all your debt from smallest to largest, sell the vehicle. So he's not putting no more money on top of that one. But in order to do that, we really put baby step two on hold for a second. Exactly. To pile up cash to get the car and to do the other.

But then that releases him from this larger debt. Right. So in a sense, the $1,400 holy he's in becomes an item in the debt snowball and moves to the front. There it is. That's in a sense what we're doing. Instead of the whole $17,000 debt. Yes. It's the $1,400 hole.

And so that's the way the logic flow works on this, the critical thinking skills. Yeah. Adam, you're good, man. You're good. You got this, baby. Knock it out, man. Knock it good. You got this, baby. Knock it out, man. Knock it out. This is the Ramsey Show. Your number one wealth building tool is your income.

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How can we help? Hi, Dave and Anthony. How are you all doing today? Better than we deserve. What's up? Outstanding. Hi, Dave and Anthony. How are y'all doing today? Better than we deserve. What's up? Outstanding. So my wife is a teacher, and we just moved from Georgia, where she was contributing to the Georgia teacher retirement system and a 403B because she was getting a match from the school system. We have recently moved to the Louisville, Kentucky area, so she moved her funds from the teacher retirement system to the 403B since she can no longer contribute to that teacher retirement system. Her new school system doesn't offer

any kind of 403B match, and she's still required to contribute to the Kentucky teacher retirement system. We don't really know what to do with her 403B now since there's no match, and she has to make the mandated contributions to the kentucky trs we only plan on living in kentucky for another two to three years so should we use the 403b to roll the kentucky trs funds into when we leave likely even in georgia then she can just like max or roth ra instead while she's here no i think this might be the right move no stop one to left and right limit check no it's not um here's the thing your military so you're moving all the time and that means she's going to constantly be having this question every time she moves careers every time every time

anybody out there listing moves a job always take any retirement with you that you can take and roll it to an individual IRA. If it's a Roth 401k or a Roth 403b you're coming out of, move it to a Roth. If it's a traditional, like in this case, it's pre-tax, you're going to move that to an individual Roth. I mean an individual IRA. If you move it to an individual IRA, there are no taxes. So what you're telling me is the Georgia retirement gave her a lump sum and moved it into her Georgia 403B, right? It's an independent 403B just through an insurance company.

Okay. And the Kentucky is mandatory contribution to a 403B, correct? It's a mandatory contribution to the Kentucky teacher retirement system. Well, I guess I got like a 401A from the two. Okay, so it's not in a 403B. No, sir, but they allowed me to roll that 401A from the Georgia TRS to a 403B. Yeah, I would not do that. Have you done that already?

Yes, sir, I did. Okay, well, you can still move it. The good news about a 401K you cannot roll out of while you still work there. A 403B you can roll out of while you still work there. So anything in Kentucky, you can get into that 403B, get it in there, so you can roll it out almost immediately into a rollover IRA. So go to DaveRamsey.com, click SmartVestor, find a SmartVestor Pro in your area in Kentucky where you are, and sit down with them. They'll verify what I'm telling you.

But any money you've got in a 403B anywhere, you can and should immediately roll to an individual IRA. The beauty of this is you don't have to just do hopscotch every time you move. You've got one account with your SmartVestor Pro, and each of the times you do a rollover will have a different account number within your main account, within your master account, but you will still have all of your money in one place being managed with you telling it what to do with a good SmartVestor Pro,

and every time you get any money loose from anything. Now, the Kentucky stuff, when is she vested in that? When she leaves? So she starts considering the Kentucky TRS the day that she gets her first paycheck, up until she terminates her employment with anywhere in Kentucky. So when she terminates, can she take it with her she can take it with her and so what you're saying is the idea is to not roll that 401a into a 403b when we leave no roll it to an ira roll it to our array okay every time because what you're going to end up with let's say you live in 10 different places.

She's going to have 10 different accounts with IRAs all in one master account where you're managing one set of investments all exactly the same way instead of going from lame 403B to lame 403B. Because most of these 403Bs, the options in them are insurance-based, and they suck. Agreed, sir. So even if they offer a 403B match. If they offer a match, take a match.

But they're not matching your rollover anyway. Sure, agreed. They would only match what you're putting in. So now that's different than your annual. I'm talking about when you leave, never roll it to the next company. Always roll it to an individual, an IRA, an individual retirement account. Does that make sense? Yes, sir, that makes sense.

So you end up with a stack of ten of those if you had ten different jobs. So I've got an IRA, I've got an old SEP, I've got an old some other retirement thing that I went defunct on. Oh, an old simple. And I've rolled them all into a series of individual IRAs. And then I converted them to Roths because I was in a position to pay the tax when I converted them to Roths. But the point is never leave your old retirement back behind you unless you're forced to and never move it into the new company. And there's no case that you're forced to and never move it into the new company on and there's no case that you're forced to do that yeah i had two four or three bees coming from uh the church world day

before i came here and i wrote those into an ira and individual iras exactly that step yeah yeah always bring it with you and always put it in an ira later you can convert that to a roth if you have some extra money to pay the taxes that that creates. But right now, just move it into the IRA in good growth stock mutual funds. Because when you're working with an IRA with a broker like a SmartVestor Pro, you've got 8,000 choices, not four. Yep. Yep. Or eight.

Yeah. Or whatever. So very interesting. Good detailed question. And hey, man, the good news is you're paying attention. So you're not going to mess this up. One way, I mean, what you did was not horrible. This is just like you did like an 8, and I did like a 10.

That's all. You didn't do like a 2, and I did a 10. Okay? You did not a bad thing, but all we did was just give it a little more horsepower. Yeah. Because you can pick better mutual funds. You've got more control of it, and you've got your broker looking over it instead of languishing over here in an old 403b yeah that's good stuff chris is with us in tampa florida hey chris hey dave hey anthony how's it

going guys good better than we deserve sir how can we help so right now me and my girlfriend are graduating seniors in the college right now and and she will be graduating with about $45,000 worth of debt split between private and public student loans. And I will not be graduating with any. And my question was, what is the best way to help her pay off all her debt? Let me tell you the best way you can help her is by not giving her a dime and just by encouraging her to take her debt seriously. And the reason why that's the best way, man, is you want to just protect yourself, protect your heart, and then just encourage her along the journey. Like, hey, are you going to take this serious? How can I encourage you? What are you going to do about this debt? But do not

hear me, young man. I hear it in your heart uh do not spend a dime of your money to help pay off hers build your foundation so if y'all do get married you can then help her then but for right now mind your business help her out and she'll be all right how much student loan debt she got she was about 45 000 you pile up 45 000 in your savings account while you're dating and engaged, and when you come back from the honeymoon, write a check and pay it off. But don't you pay off anybody's debt that you're not married to. Yeah. Period.

Ever. No exceptions. Ever. Was I unclear? No, you was real clear. Okay, good. This is The Ramsey Show on the debt-free stage, Eric and Brianna are with us. Hey, guys, how are you?

Hey, folks, how are you all doing? Welcome, welcome. Where do you guys live? Houston, Texas. Welcome to Nashville. How much debt did you two pay off? We put off $75,000 in about two and a half years. Good for you.

Excellent. And your range of income during that 30 months? We started at $65,000, went up to $115,000, and now we're down around $85,000. Okay. Sounds like a story there. What kind of debt did you have, $75,000? Well, just student loans. Most people who go to school, for as long as I do, they call them doctors.

It took me seven years to get my bachelor's because Anthony wasn't around whenever I was going through that time. And I missed out on all the good advice. Oh, man. I love it. Good for you, man. That's fun. What do you guys do for a living? I'm an engineer.

And I own my own baking business. Baking. Wow. Very cool. Yum. Good stuff. All right. So $75,000 worth of student loans, mainly on the engineer.

Yeah. Or totally on the engineer. Totally. Well, yeah, she had a little smidge. All but like 16 were mine. All but a dash of salt. That's it. Okay.

All right. Good. What happened 30 months ago? What lit you guys up to do this? This is pretty impressive. Well, we'd gotten married. We're going through our pre-marriage counseling, and we had a lot of good influences around us who advised us on some of the same

things you talk about on how money can be one of the biggest stressors on a marriage. And so that's something that we wanted to attack together, get beneath us and behind us as we looked at the future together. Amen. I love it. I love it. What, how, what, what, along this journey, what would you say was the hardest thing to do? No fun. We said no a lot. Like Dave says,

no is a complete sentence. And that's something we had to do an awful lot. I mean, no to multiple family trips and friends wanted to eat out all the time. We had a $25 a month

eat out budget, which basically would pay for some fast food and maybe ice cream if we didn't get the extra fries. And so we kept it really tight for two and a half years. Yeah. Wow. Good for you guys.

Was it worth it? Oh, yeah. Oh, gosh. Absolutely. Absolutely, absolutely. All right. So you're getting pre-marriage counseling. Somebody says money's the biggest problem.

Don't have that problem. Work on it. And you said, okay. Then what did you do next? Well, I don't like spending money to begin with so it wasn't hard for me hard for me i was like yeah let's do this he's like oh okay yeah well let's we'll do it yeah we we got a plan we sat together and we we detailed out, like you said, mostly my debt. We looked at what it was going to take monthly to pay that off. She kept me honest, and we just got after it together.

It was the first thing we did, and really there wasn't much conversation. It was just we were pulling the sled in the same direction. Gotcha. How did you get in touch with us? You were a constant companion on NIMS Family Road Trip, so I appreciate that. All growing up, you were the sixth family member in the car as we drive from houston to ohio and houston to arizona to visit family listen to the radio for years um and i had to listen uh to financial peace in high school okay i had no two two forced yeah forced in the car ride when you're a kid and i you notice she said i had to in high school. It was a requirement

to pass. Not I got to, but I had to. It was required to graduate. I know, that's awesomeness. Yeah. And so you already

knew this stuff. And so when he started talking about it, it was easy to plug into our stuff. Oh yeah. Yeah. Okay.

Because it already been around you for a generation. Yeah. That's exactly it. Very good. Now do you think that we should force

all of our students in America to do what you did yeah because you at least hear that you need to save money or there's a better path than just what you hear from everybody else like oh it's just a car payment it's good and so for me my mom was like no we don't need to do that like you don't need to do that yeah you have to go into student loan debt because my mom never went to college but But I was like, well, I just heard this guy say that's not good. She was like, it's okay. It's okay.

She goes, you can pay it off after. And I was like, yeah, well, I have no other option. But you had just a tiny one. Just a tiny. Versus the guy who listens to it on vacation got nothing. He got nothing. Yeah, I immediately decided to go out of state for school and the whole mess and multiple different institutions and didn't know what I wanted to do. What do you tell people the secret to getting out of debt is? You guys are amazing.

Congratulations. Thank you, sir. I'm so proud of you. Appreciate that. Well, we've got to be pulling in the same direction. This wasn't her dragging me or me dragging her through it. It's something that we both wanted. That's the other thing.

We had a why. Ken Coleman talks about if your why doesn't make you cry, it's not your why or something at least to that effect and that's something that we believe in we we saw what life after debt looked like and we saw what the future could hold and you know with the way god's blessed us with their income and with our future possibilities we didn't want them to be hampered we wanted to be able to bless people further on down the line okay so why the income up and then come back down gosh i worked I worked. Oh, your hours. Hours, yeah. So you just went back to a fairly normal existence. That's exactly it, yeah.

And then a bunch of side gigs. I mean, dog sitting and house sitting and I did work for security and did all sorts of stuff. You just went crazy. Yeah. And a lot of the crazy is gone. Now you're back to fairly normal. Pretty much. And where are you guys at now in the baby steps?

We're paying off our, or actually we're 345. We're saving up for a down payment on our first house. First mortgage. 3B. Good. Way to go, you guys. Excellent job. I'm proud of you. Who were your biggest cheerleaders? We had our friends Jake and Jen, friends Aiden, friend

Hunter and Lisa, and then our family. They were wonderful. A lot of church small groups, things like that. Very cool. Good for you. So proud of you. Very well done. We've got a copy of Rachel Cruz's book for you, the latest New York Times bestseller to come out of Ramsey Press. It's called Know Yourself, Know Your Money.

You'll both love it. It's perfect for this situation. You guys are incredible. I'm so proud of you. All right, here they are, Eric and Brianna, Houston, Texas. $75,000 paid off in 30 months, making $65,000 to $115,000. Now back to normal at $85,000. Count it down.

Let's hear a debt-free scream. Three, two, one. We're debt-free! Woo-hoo! Yeah! This is how it's done, baby. Yeah. this is how it's done baby yeah you know the today day we've had two debt-free screams and the common thread that i'm hearing through both of them is all of them had a very detailed why the last one was like hey i didn't want my daughter to grow up with you know this struggle

um then there's this we wanted our marriage to be healthier. Not perfect, but at least healthier. Yeah. And in every case, the side benefit, the mathematical implication is that when you don't have any payments, you become wealthy. Yep. If you pay attention and start investing. Yes, sir. And it's really not rocket science. The average person will change jobs 12 times over the course of their life.

And nowadays people change jobs like they change clothes. But if they keep doing their IRAs, they keep doing their 401ks, they keep investing because they don't have it. If you just invest a car payment, you'll have millions of dollars. If you'll stay out of the car payment business, that alone will cause you to have millions of dollars. But you get rid of the car payment business that alone will cause you have millions of dollars but you get rid of sally may and give her her eviction notice and you learn to be intentional and you learn to walk side by side with your spouse it changes everything you sit down with one of these smart investor pros they can show you then

how to take that money now you can fund your kids college now you know and here's the thing people that have not gotten out of debt and they just talk they don't ever do anything yeah 98 of the people that you survey i'm making this number up but you know almost everyone you ask ask them if saving for your kids college is important they almost everybody says yes yes yeah you know how many people actually do it maybe what 10 less i'd say i'd say five to ten percent five to ten percent gotcha actually save money for their kids college everybody else is a freaking theory yeah it's something oh that'd be a good thing to do someday someday someday i'll write that book why don't you get up off your someday seriously and go do something oh Oh, my gosh. These guys are incredible. I'm so proud of them. Hey, if you text invest to 33789, folks, text invest to 33789,

you'll get one of the SmartVestor pros. Because here's the thing. The reason to get out of debt is so that you can invest. The reason to invest is so that you change your family tree and you retire with golden rocking chairs, baby. And you don't have to worry about eating Alpo living on social insecurity with too much month left at the end of the money when you're 83 and you can't freaking make your light bill because you haven't done, because you gave it all the car company.

Yes. You gave it all to master. Yes. Card. You work Monday through Friday labor to give someone else a fruit of your labor. That's exactly what happens. That's why the Bible calls it the slave to the lender. Yep.

The borrower is slave to the lender. It's more than just a metaphor. It is a mathematical freaking fact. Yes. This is the Ramsey personality number one best-selling author of the book debt-free degree is my co-host today here on the ramsey show the phone number is 888-825-5225 tom is in san antonio hey tom how are you good thank you dave uh i had a question about um a property that i sold a year ago um we had

an agreement they made a 10-year uh loan and i'm financing it for him but uh We had an agreement. They made a 10-year loan, and I'm financing it for them, but we had an agreement that they would be able to pay it off after two years. They've paid up to exactly one year so far, and I just want to know now they're wanting to pay it all off. And if they pay it all off now, I think the interest I would lose would be about $45,000, and I'm wondering if I should go ahead and take the money and invest it or stick out for the next year. Wow. So you're charging what kind of interest rate? Six and a half percent.

Wow. Okay. And so this is like an $800,000 loan? The actual loan amount was $708,000, $750,000, so about $709,000. Okay. So $45,000 is the interest for one year at six and a half. But they've been able to get a loan better than six and a half. Well, they wanted to pay it off sooner anyway, and my attorney decided it would be beneficial if we say, well, you can pay it off early, but not until at least two years.

And they agreed to that. So I don't know if they're getting a loan somewhere else or they've just got the money. It's a commercial property, and when I owned it, the occupants were paying $8,000 a month rent, and the people who bought it, their payment to me is about $4,700 a month. Mm-hmm. Mm-hmm. They've gotten another loan. Okay.

Just took them a while to get a bank. I didn't even think of that, but i guess that would make sense with six and a half percent interest they probably got a much better interest rate yeah i wouldn't take much um in a three percent world um trying to think what i would do if i found myself in this case. Okay, here's what's running through my head. I'll just go ahead and say it all out loud so you can kind of calculate it with me, Tom, okay? Okay, sure. Number one, there's the $45,000 that you would have gotten had they taken it all the way through two years. How much did they put down?

They put down, the selling price was $750,000. 750 okay so you've got a loan almost equal you've got a loan very close to equal to what the property's worth right so you don't want this property back no no uh the main reason i sold this because it's in el paso and i'm 550 miles away in san antonio you don't want it back. I mean, if they had put down $200,000 and you could take it back for $500,000 and do it again, I'd take that, right? But you don't have any equity here. You're not going to, you know, so they're not threatening to hand you the keys, but I'm just saying that kind of tells me how much hardball you want to play,

not much, because you don't want this thing back. We want to work this out. Okay? Right. So what I would do is say I was supposed to get another $45,000 out of you guys in interest. I will let you pay it off early and negotiate a prepayment penalty that is not $45,000 but less. I thought about that, and I was thinking maybe half. Exactly what I had in mind. $45,000 but less. I thought about that, and I was thinking maybe half. Exactly what I had in mind.

I might even say $20,000. Say, you know, if you'll pay me half of what you were going to pay me, they're probably, if they're getting 3%, that's still, it doesn't really save me any money. It doesn't save me money. Close enough, though. I mean, $15,000 to $ mean 15 to 20 if you could get the information out of them in the discussion as to what they're doing and what their interest rate is then it

would tell you how much it's going to save them like if they got a two percent then they'd say four and a half you can calculate out don't take the whole four and a half but take a chunk of it right but if they're getting if they're getting a four percent and they're two and a half and you're offering and the savings you're offering them is equal to 3%, they're not going to do that. I don't know how I'd find that information. I would ask. Yeah.

You think they would just tell me? Yeah. Just say, why are you paying it off? Oh, you got another loan? Cool. What was the rate you got on the new loan? I'm glad you were able to get a better rate because I want to work this out with you. I don't want to charge you the whole interest as a prepayment i want to let you go and i'd love

to have my money i got some other stuff i can do with it but let's work this out for a win-win where we kind of meet in the middle okay and don't charge them don't charge them a penalty that is greater than their savings right there you go right i get it okay so if we come to an agreement um then I should probably have my attorney drop the thing. Yeah, it should be a one-page thing. It's really a release provision. I agree to release the thing, and I'll give you a deed release on this. I'll release and cancel the note for a payment of X plus X penalty,

the actual principal balance plus a penalty of $21,000 or a penalty of $17,000 or whatever you come to agreement to, right? Yeah. That seems fair. They're getting out, and you're not going to take all of it, because I bet you they're not saving $45,000, by the way, by doing this year early. They're thinking that you're just going to go, hey, I want my money, which most people do, by the way by doing this year early they're thinking that you're just going to go hey i want my money which most people do by the way um so nothing wrong with what you're doing

i'm trying to take a little a little tougher stand uh just because it sounds like they have a real reason to do this but there's nothing wrong with asking i just like having a great conversation because if i get information i can design a deal that's good for them and good for me right i see i'm not trying to screw them i'm just trying to design something because if i was trying to screw them i would just go 45 000 bucks right because and they're not going to pay you off then they're going to sit there another year uh because they're not i'm guaranteeing you they didn't get a rate low enough on a commercial building of 700 000 loan cheap enough that they're saving 50 cents on the dollar here. Now, Dave, let me ask you this question.

Would it be a bad idea? Let's say if they come back and say, yeah, we got an interest rate for 3.5%. Would it be bad to just renegotiate the contract with him and say, all right, I'll go down to 3%? Why don't you all sign at least a five-year deal? I'd let them go ahead and get their new loan because they might lose the loan over the coming year. Or the rates might tick up over the coming year. It could change the deal. I got you.

But that wouldn't be a bad thing either. If it was longer than one year, I might consider just lowering my rate if you want to be in the mortgage business. Now, that's the other side, Tom, of this discussion. If you push this and you end up with this property back, that's a bad thing. Okay. That's why I don't carry notes back when i sell property i will sell a property cheaper as long as i get all my money yeah then if i carry a note back the only way i want to carry a note back is what we used to call in the business happy happy loans okay and a happy happy loan is you get a good enough interest rate

and which he did he got a great interest six and a half in this market is a booming interest rate right absolutely um and you get enough of a down payment that you're happy if they pay because you love the interest rate and you're happy if they don't pay because you're happy to take the property back yep and so if you put two hundred thousand dollars down on this deal and i'm getting it back for 500 it's worth, I'm not mad about taking it back because I can make money on the flip again. But he's not got any margin on taking it back because

he didn't get enough of a down payment. I like it. Now, here's another question, David. I'm asking because I'm learning. I'm learning on the Ramsey show. Charge it to my head if I ask the wrong question. I'm asking and learning. I'm debt free, got my money, you know all that. And if I go out there and do something like that and charge someone interest,

do you suggest that people do that or not do that? No, I would not do that. Because I think you can take that cash and make more than six and a half on it. I got you. Either by buying more real estate, you make a better rate of return than that if you're careful. Yeah. And or investing in good mutual funds, you can make a better rate of return than that if you're careful. and or investing in good mutual funds you can make a better rate of return than that if you're careful there you go i thought so and so and uh while that property is going up in value your note's not changing it's actually going down so you're

better off if you're going to collect payments off a building you're better off to collect rent and be the owner yes then you are collect payments off a note. That's so. And so, but if you're going to carry a note, then get a good high interest rate and get a good strong down payment, happy, happy loan. Happy on both ends. But I don't recommend that. That's why I don't carry it. Yeah. Because I figure if I'm going to sit here and worry about whether somebody's going to pay me monthly.

Yeah. I'm going to worry about the renter while this thing's going up in value. Right. And I get the upside. Yeah. So you don't get any upside once you step out of the ownership role and become the bank. Thought so. Just wanted to ask.

It's a good question. It's a good discussion. And it's something to think through. This is an unusual question in these times because interest rates are so low, very few people carry back owner terms in this situation. That puts this hour of the Ramsey Show in the books. Hey, guys, this is Kelly, associate producer for The Ramsey Show. Did you know that over 16 million people listen to The Ramsey Show every week? And a lot of those people listen on one of our 600 plus radio stations across the country.

To find a station near you, head to DaveRamsey.com slash show.