USNA " Car " Loan Money?????

Discussion in 'Naval Academy - USNA' started by Sandydesert, Nov 8, 2017.

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  1. Sandydesert

    Sandydesert Member

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    DS ( a youngster) has mentioned something to the effect that firsties and juniors are eligible for some type of loan that can be used to buy a car in the spring semester of those academic years??? Is that the ACE loan or something else?
     
  2. pleber16

    pleber16 USNA 2016 5-Year Member

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    It's the Career Starter Loan. Often referred to as the 2/C loan. USAA and Navy fed both offer loans of approximately $30K at very low interest (around 1%) starting 2/C year. A lot of mids will take it out and use that money towards a car, class ring, spring break trips, etc.
     
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  3. Capt MJ

    Capt MJ 10-Year Member

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    There are many threads on this. It is not a government program, nor mandatory in any way. It’s an extremely low-interest signature (no collateral) loan. Eligibility to take it starts junior year, in general. Payments don’t start until a few months after graduation, and the term is usually 5 years, with no penalty for early pay-off. The only requirements tend to be having a checking account and Direct Deposit of their mid/cadet pay to the lender.

    It was called the Cow Loan for many years, at USMA, and the Car Loan. It used to be structured as an actual car loan for a vehicle, with an extra cash amount added in as a career starter amount, at very low rates. That was before it was common for most mids/cadets to already have their own cars in HS.

    There are many schools of thought on this, as you will read as you browse each SA forum - look for USAA loan, NFCU loan, Cow Loan, Career Starter Loan, Career Loan. Some choose to take it, some don’t. It’s meant to pay down higher-cost debt (some with prior college may have student loans, others may have credit card debt), fund an IRA and other investments, set up an emergency fund, help with a good used car and that first apartment, graduation and uniform expenses (Marines pony up serious cash for their first mandatory set of uniforms. There is a reason they always look spiffy.).

    Of course, there are a few who do stupid things. Much depends on the mid or cadet’s personal financial situation and their approach to personal financial management.

    ROTC, OCS/OTS and direct commissions also have their versions of the loan.

    There is no guarantee of the loan each year. For the companies that offer it, at a loss, it’s an investment in starting a career-long or life-long relationship.

    At my former employer, I was directly involved with the program. I yield the floor to @hornetguy who may have fresher insights. I have laid out facts as I knew them neutrally - as I have said, there are various opinions on this.
     
    Last edited: Nov 8, 2017
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  4. USMAROTCFamily

    USMAROTCFamily 5-Year Member

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    Some buy engagement rings with the money............... Does that fall under the stupid category or smart management of the funds? :) I'm sure this would fall under the varying opinions.
     
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  5. Capt MJ

    Capt MJ 10-Year Member

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    The worst stupid I saw during my BattO tour at USNA was a Mid who chartered a private plane to take him and Ring Dance date to NYC for an after-party. Blew it all. He was from a family who didn’t have much, and got intoxicated, literally and figuratively, seeing himself as a guy with means.
     
  6. AF6872

    AF6872 10-Year Member

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    That is why you see a lot of Corvettes, Mustangs and big pickups in the 1st/c parking along the seawall. Marine Uniforms cost big bucks out of USNA.
     
    Last edited: Nov 9, 2017
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  7. jl123

    jl123 Member

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    If managed wisely, it also helps establish a good credit rating - useful down the road when looking for competitive mortgage rates.
     
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  8. THS

    THS 5-Year Member

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    DS is a 2/c and used the loan to buy a car when he was home for summer leave; we paid to ship it back to Annapolis rather than have him drive solo from SoCal. He paid about $240 for an academic year parking permit to park at the stadium. During football season he has to park elsewhere during home games. Most of his friends took the loan and bought cars, or plan to use it to travel during breaks/leaves.
     
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  9. Sandydesert

    Sandydesert Member

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    Many years ago ( early 80s) a family member had a business meeting near the Yard. His business acquaintance took him on a Yard tour. My family member made a comment about all the brand new Mustangs parked on the Yard, it looked like a Ford dealership. His acquaintance told him the car dealers in Annapolis knew about the 2/C loan and the dealers were extremely competitive with one another to get the 2/Cs to purchase a car from their specific dealership, not the other dealers in town.
     
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  10. DesertCaliMom

    DesertCaliMom Member

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  11. THS

    THS 5-Year Member

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    My brother-in-law graduated from USNA in the '80's and told DS he used his loan to buy a new Mustang! Fortunately DS is sensible and bought a used car.
     
  12. AF6872

    AF6872 10-Year Member

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    DD bought a used Audi.
     
  13. Old Navy BGO

    Old Navy BGO 5-Year Member

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    Used cars are alot more reliable than they were in the 70s and 80s, and new cars are alot more expensive...even adjusted for inflation. Used makes sense now, but surely loved my new Mid-mobile (until my wife totaled it in Pcola).
     
  14. parentalunit2

    parentalunit2 5-Year Member

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    Stupid, yes. But at the same time, also kind of awesome and epic.
     
  15. Capt MJ

    Capt MJ 10-Year Member

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    Ok - here is the really stupid part I omitted. He was unable to pay for his Marine uniforms in the spring of 1/c year due to his indebtedness with credit cards by that time a year later. The Marines de-selected him. He went Navy.

    I know all this first-hand because I was the BattO selected to counsel him weekly on his budget and spending. He thought he was making progress on his spending habits when he told me he had found a club in DC that had a 1-drink minimum and not a 2-drink. And much more in that vein...I can‘t begin to describe it.
     
  16. Old Navy BGO

    Old Navy BGO 5-Year Member

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    Good to see that Midshipmen haven't changed that much...Still remember my roommate sitting down with a handful of Visa bills the week before Spring Break, adding up his remaining credit limit on various cards to figure out how much money he had to spend in Ft Lauderdale. He came back with a handful of maxed out cards. (His first job after leaving the Navy was as a "Financial Advisor" !)

    On a more serious note, does USNA have some form of financial literacy program now ? I seem to recall that we had a handful of briefings late First Class year, trying to prepare us for the real world. That would probably be more effective earlier in the game, before the Midshipmen go out and do stupid things with the money they have.
     
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  17. VelveteenR

    VelveteenR Just gathering dust in the nursery...

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    Financial literacy begins at home, when kids get that first dime. ;)

    College is a bit late IMO, but I know that USMA has briefings and begins financial advising Plebe year and doesn't let up. Even so, lots of stupidity with that Cow loan I hear.
     
    Last edited: Nov 11, 2017
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  18. AF6872

    AF6872 10-Year Member

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    And those Marine uniforms and Sabre cost some big bucks if you have to ditch all Navy uniforms.
     
  19. Cerberi

    Cerberi Member

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    This is a fallacy and the credit card companies have marketed to my Mid (as they do all college kids) that she needs to 'establish' credit now so she will have a good credit rating later. If you show up at a bank/credit union with $ in the bank and a good job with a solid work history - like being a Naval/Marine Officer with 0 debt - you will have no as in absolute zero issue in obtaining a mortgage/car loan at attractive rates.

    There are pro's and con's to the loan program being discussed, but using it to establish a credit history for later is not one of them
     
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  20. jl123

    jl123 Member

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    In a rational society that would be true. However, interest rates vary based on an applicant's credit rating, and credit rating is not calculated on assets or job history. It is solely based on a demonstrated history of an applicant borrowing money and making repayments.

    As an O-3 on active duty I financed a car and got a good interest rate, but not the best interest rate, which was offered only to those with the highest credit rating. The reason - minimal credit history.

    Today, the only credit I use is credit cards, which I pay in full every month. Haven't had a mortgage, car loan, or installment loan in many years. I check my credit history and rating regularly as a security measure against fraud and identity theft. Along with the numerical rating, there is a list of factors that positively and negatively influence the score. The one negative influence on my score - lack of recent mortgage or installment loan.

    Credit history and ratings are not only used for obtaining loans - they are used in employment background checks, security clearances, etc. Establishing a good credit history is part of becoming a responsible adult in modern society.