“This is the worst debt I’ve ever seen in my life”: A young Louisiana couple can’t buy a house because they have $210,000 in consumer debt and earn $48,000. Caleb Hammer calls it “crazy”

Low income and superficial savings are just some of the biggest barriers preventing young families from getting on the property ladder.

However, Bryson, 27, and his wife face a particularly unique challenge: They have maximized their borrowing capacity on consumer debt. The young couple, from Lake Charles, Louisiana, has a newborn baby and wants to find more space for their growing family.

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Unfortunately, his portfolio of car loans, student debt, and credit card balances totals a whopping $210,000, making it difficult to get a mortgage.

“I think this is the worst debt I’ve ever seen in my life,” said YouTuber Caleb Hammer, while reviewing a lot of his finances on a recent episode of his show. Financial audit.

He believes the couple is flirting with disaster.

Flirting with financial disaster

Bryson and his wife have stable careers. He works as an operations manager for a company that provides valet services, while she works as a leasing agent for an apartment complex. His combined income was $92,000; however, this was before Bryson’s wife went on maternity leave. His current salary is $48,000, but he is working on different business projects and side hustles to increase that income.

Unfortunately, these companies have not made substantial profits so far. Instead, Bryson has borrowed money to purchase trucks, vehicles and equipment to carry out these ventures. “You need additional income to pay off all the debt you took on just to generate additional income,” Hammer said.

The outstanding balance on Bryson’s RAM 2500 alone amounts to a staggering $66,000. He even contributed negative equity from a previous vehicle for this new truck.

But that’s not the only auto loan in your portfolio. Bryson has numerous other vehicle loans, including a $37,000 loan for the caravan her family currently lives in. This loan, as well as the mortgage for the land it sits on, has interest rates of 8% to 9% with balloon payments to be made over five years.

Excessive car loans have become increasingly common. In fact, according to the Federal Reserve’s latest Household Debt and Credit Report, American consumers now owe more on auto loans ($1.61 trillion) than on student loans ($1.6 trillion). .

The rising wave of auto loans has caught the attention of financial experts. In mid-2023, portfolio managers Paul Van Lingen and Ara Balabanian warned their investors that auto loan defaults and recoveries “will continue to deteriorate further toward levels not seen since the GFC (global financial crisis).”

Meanwhile, ProPublica reported that the number of subprime auto loan borrowers who were behind on their payments by 60 days or more was at its highest levels since 2017.

Unfortunately, this is not the only financial crisis Bryson is a part of. He also has $11,255 outstanding on a private student loan at a whopping 14% interest rate and admitted that he and his wife have spent too much on credit cards in recent years. “We haven’t been good with credit cards because of negligence and not paying close attention,” he revealed.

Since his wife took maternity leave, which was paid in a lump sum, the couple has relied solely on Bryson’s income to survive. If he were to lose that income, Hammer said, the situation could deteriorate quickly as the payments continue to pile up.

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There is no easy solution

The first step toward financial recovery, according to Hammer, is to increase income as soon as possible. He advised Bryson to eliminate most of his side businesses and concentrate on just a couple of the most profitable ones. This should allow Bryson to sell some vehicles and equipment that are no longer needed.

As for debt, Hammer prescribed the snowball method: a debt reduction strategy that involves paying off loans from the smallest amounts to the largest while gaining momentum as each balance is paid off.

Hammer also suggested the family move into a rental apartment to have more space while allowing them to sell their land and caravan. This would help eliminate loans with outstanding balloon payments.

In theory, this strategy should put the family in a much better financial position over the next three or four years. However, Hammer warned that the plan could be derailed if the couple ever ran up debt in the coming weeks, months or even years.

“I ask you one thing: don’t borrow anymore,” he told Bryson.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

By Sam