Case of the 125 Percent Ripoff Rate

I was walking down Main Street the other day; whistlin’ Dixie and feelin’ good. I was on my way to the grocery store to buy lunch and dinner for the sweet old lady who lives next door to me.

Since I’ve been saving money and doing things the Dave Ramsey debt-free way, I’ve been able to do all sorts of nice things for people who need it. I’ve worked my way up to where I can give like it’s going out of style.

Speaking of not having any style, I spotted Big Bad Bank across the street from the store. I was about to turn away when I spotted an average joe coming out of there, clutching a handful of papers. His face told the whole story; whatever he just did, he wasn’t sure it was a sweet deal. I made a beeline for the bub; he saw me coming.

“Hey, Mr. Tective,” he said, knowing I was moving in for the kill. “How … how are you today?”

“Better than you, Jack,” I replied. “Who spit in your cereal?”

“Why, what do you mean?” he said, trying to play dumb. I’ll give him credit; whatever he just did was dumb, all right.

“You’ve got a bad look on your mug,” I said.

“Oh, it’s nothing. I just was paying a visit to Big Bad Bank.”

“What do you want with them? Or rather, what do they want with you?” I pressed.

He shrugged. “It’s kind of a long story.”

I checked my paid-for watch. “It’s 9 a.m. I’ve got all day, baby.”

“Well, the stock market is really good right now. A buddy of mine called me with a ‘can’t miss’ investment. It sounded great, but I needed some money. So I went to the Big Bad Bank and got a home equity loan.”

I kept my best poker face on, trying to not go crazy ape. The initials for home equity loan are HEL. Just like Dave says, the banking industry left off the extra L.

“I got a 125 percent loan against my house,” he said.

My jaw hit the ground. However many times Dave had said not to do that, he can add one more to the list.

“The guy in the bank said it was a good idea because the interest rates are so low,” he said, sounding flat.

“What are the terms?” I asked him.

He was quick. “The interest rate is 6 percent on $50,000 for 30 years.”

I pulled out the Crusher and ran the numbers. I finished and looked at him.

“So you’re gonna pay almost $59,000 in interest over the next three decades?”

“Well, yeah. But still, the rates are low,” he said.

“That’s right,” I said. “They are low. But the only thing lower than that is some guy telling you that you need to do this.”

“What do you mean? I’m pretty sure this is a good idea. Don’t you?” he asked me, looking for some backup. I wasn’t about backup, baby. It’s hard being at someone’s back when you’re too busy being up in their face.

“Listen, bub, and listen good,” I said. “Those papers in your hand might as well be a pair of 3s in poker. With either one, you’re gonna lose.”

“Listen, Mr. Fancy Pants,” he shot back. “For your information, I make good money at my job and this investment is going to help me pay this money right back.”

“What do you do, jack?”

“I’m an assistant regional manager for a sales company,” he said.

Time for the knockout blow, I thought.

“What if your company promotes you and you have to move to another state? Or worse, what if you miss your sales goals and get fired? You can’t sell the home. Youowe too much on it.”

“On top of that, investments take time. If you think you can just buy a stock one day, sell it a month later and come out ahead, you’re dreaming. You’re going to be paying on that loan until you’re walking with a cane,” I finished.

He looked like he’d just seen a ghost. This lesson was sinking in bigger than the Titanic. After a couple of minutes, I got tired of waiting.

“Any way you can make this little loan go away?” I asked him. “Seeing as how you’re playing with snakes, you’re begging to get bit.”

He thought for a minute, then the light came on.

“Yeah! Yeah there is! The banker guy said there was a three-day waiting period before they cut the check to me, so I can back out if I want to.”

“Believe me, baby, you want to,” I said. “The only good debt is no debt.”

He turned around and went straight back into the bank. That was enough for me, baby. In the meantime, I got Dixie to whistle and good to feel, and lunch to buy for Mrs. Turley.

Leave a Comment