A cousin of mine purchased a compact SUV, a couple of years ago. She didn’t have great credit, but she saw this as her chance to rebuild. If she made on-time payments, she could raise her score, gain stability, re-finance later and finally get ahead.

However, the dealer was a shark, and my cousin? She was tonight’s dinner. They sold her a $35,000 car at an astronomical 22% interest rate, rolled in a few thousand dollars of debt from her old car, and packed the contract with add-ons she didn’t fully understand.

On paper, the monthly payment looked doable. In reality- it was a $35,000 loan that would balloon into more than $65,000 over time. All of her initial payments only covered the interest and one setback elsewhere meant she couldn’t keep up. The loan was simply unsustainable.

Fast forward to today, she now owes $36K on a car worth $24K and the stress isn’t just financial, it’s emotional. What appeared to be a “fresh start” has turned into an albatross around her neck.

Why This Happens So Often

Car buying isn’t just about comfort and safety ratings. At the end of the day, it’s about the numbers and that’s where most buyers get burned.

• Dealers roll old debt into new loans, so you’re financing regret.
• Add-ons like “protection plans” and coatings get financed too and you end up paying interest on junk you don’t need.
• Confusing contracts and pressure tactics push buyers to sign without fully understanding the cost.

The result? Buyers think they’re “qualified,” or even winning, when really, they’re the ones being eaten for lunch.

How To Protect Yourself

Before you set foot on a lot, do this:

• Know your credit score and research the rates you should actually qualify for.
• Get pre-approved at a credit union or bank. If the dealer offers you 22% but you have an offer for 8% in hand, the conversation is over.
• Say no to rolled-over debt. For the love of God do not carry negative equity from one car loan into the next.
• Set a Max all-in price. Know the total amount (including taxes & fees) you’re willing to pay and stick to it.
• Have someone review the deal before you sign. Better yet, ask for the paperwork in advance so you can review it at home.
• Be ready to walk : If the math doesn’t work, the deal doesn’t either. Your greatest leverage is saying no.  A car loan should move you forward, not bury you alive.

How Bad Loans Sap Your Peace of Mind

Escaping the hellhole of a bad loan is the hardest part. I’ve been trying to help my cousin work her way out, and here’s the reality:

She received a CarMax offer for $24K for the car which could’ve been a lifeline. But her lender won’t release the title unless she pays the full $36K balance. That means she can’t sell the car and refinance the remaining $12K under better terms.

The missed payments have already wrecked her credit, so she doesn’t even qualify for a personal loan to cover the gap. Unless the lender bends, her only option may be surrendering the vehicle. That would stain her credit further, and she’d still owe the negative equity. Bad car loans don’t just drain your wallet. They chip away at your confidence, your future options, and your peace of mind.

The Road Ahead

For my cousin she’s now focused on rebuilding her savings, paying bills on time, keeping balances low, and never letting this happen again. Her story is painful, but it’s also a warning worth sharing. Financial illiteracy is expensive not just in missed investments but more importantly in our day to day lives.

If this article helped you, share it with someone who needs to hear it. And before you step into a dealership, check out my article How I Used ChatGPT to Buy a Car and Save Thousands. If you’re serious about becoming financially literate and want to use AI to invest smarter, subscribe below and grab my free Savvy Investor AI Toolkit it could save you far more than a car payment.