Rachel from Sacramento, California, called into “The Ramsey Show” with a financial dilemma that she admitted was of her own making. The 61-year-old explained she bought her daughter a $27,000 car in September with the understanding that her daughter would refinance it into her own name once her credit improved. A year later, the loan and insurance remain in Rachel's name, and the situation has snowballed.
A Costly Mistake
"It’s almost a year she hasn’t done that. She's getting FasTrak tickets, that's like a toll bridge thing. And her insurance is not covered by anyone other than mom. I feel like I'm ready to do something drastic just to pay off the car and just give it to her," Rachel said.
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When asked about the numbers, she admitted everything, including the loan and registration, was in her name. She described herself as "dummy me," acknowledging the decision had backfired. Now, she's considering tapping into her Social Security early, using a home equity line of credit, or cashing out a lump sum from her employer to resolve the debt.
Personal finance expert Dave Ramsey told her directly, "Sweet girl, you made a mistake. Undo the mistake. Don't keep doing it."
Misguided Help Made Things Worse
Ramsey emphasized that Rachel's gift of the car had not helped her daughter but instead trapped her. "What you did was not a blessing to your daughter. You didn't help your daughter. You hurt your daughter," he said. "You put her in a situation where she can't afford a car."
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Rachel argued that her daughter, a single mother with three children, still needed reliable transportation. Ramsey agreed but pushed back on the idea that it had to be a $27,000 vehicle. "She does not need a $27,000 car, and she's irresponsible, and she didn't follow through on what she said. Honey, she can get a $5,000 car. Single parents do it all the time."
When Rachel mentioned possibly using a HELOC or other funds to pay off the balance, Ramsey asked, "Are you a multimillionaire?" When she replied no, he shut down the idea: "You don't have the money to throw around $27,000, do you?"
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The Way Out
Co-host Rachel Cruze laid out the next step: sell the car, even if it meant being underwater on the loan. If the car sells for less than the $27,000 owed—say $24,000—she would need to cover the $3,000 difference.
She outlined a possible plan: take out a small loan of around $8,000 from a credit union. Use $3,000 to pay off the shortfall and $5,000 to help her daughter purchase a modest used car. That way, Rachel would replace an unmanageable debt with a smaller, realistic one while also giving her daughter a vehicle she could actually afford.
Ramsey concluded with a warning about misdirected generosity. "When you're trying to bless somebody and you do it wrong, you don't bless them, you curse them," he said. "And that's what you did. You didn't mean to, honey, but it's what you did. So, you need to undo it."
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