Posted on Jun 27, 2016
Military Personnel’s Quick Guide to Navigating Financing Options
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Have you ever had an unexpected or emergency purchase? Have you tried to finance it? There have been times in my life when this wasn’t an option. Whether it was living paycheck-to-paycheck on an enlisted salary or my struggles qualifying for affordable credit without any credit history, I have had to consider using expensive financing alternatives.
If you are considering financing a purchase, realize that not all financing options are created equal. Some include high interest, high fees, or high prices. Listen to my advice, and you can better navigate your credit options and avoid surprises that threaten your financial stability.
Here are my tips about the four primary financing options military personnel can access to make a large or unexpected purchase—e.g. furniture, kitchen appliances, TVs, electronics, strollers for new baby, etc:
1. Payday Loans: Highly risky. Avoid this option. They can easily lead to a circle of debt. If you take a $500 loan, you typically need to pay $600, and the chance of having $600 available on your next payday to meet the payday loan is unlikely. If you cannot pay it back, the amount you have to pay back gets higher and higher. If they have to roll the $600 into the next payday, they will likely owe $720 or more. It’s easy to see how you may find yourself in an unrelenting “circle of debt.”
Tip: Read the fine print. Make sure you know what the terms of loan are, when the loan needs to be paid back, and what the cost is to roll over the loan to the next pay day.
2. Rent-to-Own: Although you get manageable weekly payments for furniture, renters can end up paying four times the retail amount for a product, and the penalty for a missed a payment is often repossession.
Tip: If you need to rent furniture after a move, it may be worth renting furniture for a couple weeks. Make sure you calculate the weekly payments until the rental contract’s end date, since it will probably dissuade you from taking the contract to term.
3. Credit Cards: Unless you pay off your balance in full every month, every time you use the card, you pay interest on the stuff you purchased from the moment you purchase it. Add a large expense to the card, and you’ll find yourself with a balance that is hard to pay off.
Tip: Make sure you know your interest rates on each of your credit cards and pay off the one with the highest interest rate first. If applying for credit, make sure you read the fine print for interest rates, annual fees, and potential penalties.
4. Savings & Credit Safety Net: Although it sounds like it could be a credit card, a credit safety net is there when you need it and always offers 0% APR, helping you save on typical financing fees. It stands firm in never charging interest or fees and has zero associated gimmicks. By paying over time for purchases at no added cost, users avoid revolving debt and accruing interest that comes with credit cards or other financing options.
Tip: Check out Zebit. It is a new savings and credit safety net that offers $1000 interest-free credit without a credit check to active and retired military. Its responsible credit can be used to make purchases in the Zebit Market, featuring thousands of brand name goods and services at retail prices. If your refrigerator breaks or you need a mattress like I did when I decided to move off base, rather than financing it at a high interest rate, you can shop at Zebit and pay it off over time at no additional cost above retail. Since there is a guarantee of no interest ever, you don’t rack up credit card debt and accruing interest, saving you a ton of money in the long term and you can feel a lot less stress in the short term. If I had access to this option when I was enlisted, I would have slept a lot better at night knowing I was financially secure. Here’s the site if you’re interested: http://rly.pt/zebit-military
The next time you come into a situation where financing is the only option, I hope this advice helps you respond to emergencies, unexpected purchases, and costly life events more responsibly.
If you are considering financing a purchase, realize that not all financing options are created equal. Some include high interest, high fees, or high prices. Listen to my advice, and you can better navigate your credit options and avoid surprises that threaten your financial stability.
Here are my tips about the four primary financing options military personnel can access to make a large or unexpected purchase—e.g. furniture, kitchen appliances, TVs, electronics, strollers for new baby, etc:
1. Payday Loans: Highly risky. Avoid this option. They can easily lead to a circle of debt. If you take a $500 loan, you typically need to pay $600, and the chance of having $600 available on your next payday to meet the payday loan is unlikely. If you cannot pay it back, the amount you have to pay back gets higher and higher. If they have to roll the $600 into the next payday, they will likely owe $720 or more. It’s easy to see how you may find yourself in an unrelenting “circle of debt.”
Tip: Read the fine print. Make sure you know what the terms of loan are, when the loan needs to be paid back, and what the cost is to roll over the loan to the next pay day.
2. Rent-to-Own: Although you get manageable weekly payments for furniture, renters can end up paying four times the retail amount for a product, and the penalty for a missed a payment is often repossession.
Tip: If you need to rent furniture after a move, it may be worth renting furniture for a couple weeks. Make sure you calculate the weekly payments until the rental contract’s end date, since it will probably dissuade you from taking the contract to term.
3. Credit Cards: Unless you pay off your balance in full every month, every time you use the card, you pay interest on the stuff you purchased from the moment you purchase it. Add a large expense to the card, and you’ll find yourself with a balance that is hard to pay off.
Tip: Make sure you know your interest rates on each of your credit cards and pay off the one with the highest interest rate first. If applying for credit, make sure you read the fine print for interest rates, annual fees, and potential penalties.
4. Savings & Credit Safety Net: Although it sounds like it could be a credit card, a credit safety net is there when you need it and always offers 0% APR, helping you save on typical financing fees. It stands firm in never charging interest or fees and has zero associated gimmicks. By paying over time for purchases at no added cost, users avoid revolving debt and accruing interest that comes with credit cards or other financing options.
Tip: Check out Zebit. It is a new savings and credit safety net that offers $1000 interest-free credit without a credit check to active and retired military. Its responsible credit can be used to make purchases in the Zebit Market, featuring thousands of brand name goods and services at retail prices. If your refrigerator breaks or you need a mattress like I did when I decided to move off base, rather than financing it at a high interest rate, you can shop at Zebit and pay it off over time at no additional cost above retail. Since there is a guarantee of no interest ever, you don’t rack up credit card debt and accruing interest, saving you a ton of money in the long term and you can feel a lot less stress in the short term. If I had access to this option when I was enlisted, I would have slept a lot better at night knowing I was financially secure. Here’s the site if you’re interested: http://rly.pt/zebit-military
The next time you come into a situation where financing is the only option, I hope this advice helps you respond to emergencies, unexpected purchases, and costly life events more responsibly.
Finance
Money
Loans
Advice
Command Post
Posted >1 y ago
Responses: 3
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When unexpected life changing things happen (like having a child), I took advantage of the Fleet and Family Services. They provided me a baby classes based on a budget (they gave me some great goodies like a onesie for newborns, blanket, bag, coupons galore, etc. It help me figure out how I was to manage with having an E3's salary, currently financial obligations and having a baby. Also with being on a budget I used WIC for about 8 months after my son was born; he needed formula and that stuff isn't cheap. WIC covered an X amount of cans of formula, baby food and good nutritious food for you and your family. It didn't cost me anything, just had to qualify based on my family's income.
Also Fleet & Family Services had other options available too. If you needed to have a pay loan but would have to pay back when you got the money, they can do that for you. They can give you the amount you need ( I think it's like a $1000 cap, idk) but they will loan that out to you, no questions asked and when you pay day comes, they can either have them take it out of your check or you can pay them directly. I never used the service but I heard good things about it from others.
I don't know if the Air Force and Army has a program like Fleet & Family, but it has helped me and a few other shipmates when they were in a bind.
Yes, I did use finance cards but I didn't put the max on them....I would usually pay more than the monthly so if I was in a bind I could pay the minimum or pass the month with the accumulated amount I've paid previously.
I've learned a lot of ways to help myself benefit when I'm in a bind along with services that the military provided.
Also Fleet & Family Services had other options available too. If you needed to have a pay loan but would have to pay back when you got the money, they can do that for you. They can give you the amount you need ( I think it's like a $1000 cap, idk) but they will loan that out to you, no questions asked and when you pay day comes, they can either have them take it out of your check or you can pay them directly. I never used the service but I heard good things about it from others.
I don't know if the Air Force and Army has a program like Fleet & Family, but it has helped me and a few other shipmates when they were in a bind.
Yes, I did use finance cards but I didn't put the max on them....I would usually pay more than the monthly so if I was in a bind I could pay the minimum or pass the month with the accumulated amount I've paid previously.
I've learned a lot of ways to help myself benefit when I'm in a bind along with services that the military provided.
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PO1 (Join to see)
Capt Tom Brown - Absolutely. Being a E3 and having a kid is a real struggle. I can't imagine if you are an E1.
Plus I was very fortunate with a family who helps as much as they can.
Plus I was very fortunate with a family who helps as much as they can.
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Capt Tom Brown
PO1 (Join to see) I have often thought that training and education of this nature should be provided by folks of the same age and rank group as those in the class. I think a young E3 or E4 talking to a group of spouses of the same nature would be a lot more credible than some old rich retired O6 standing up there saying "Ok people to make nickles ya gotta squeeze yr pennies."
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PO1 (Join to see)
Capt Tom Brown - I agree. I found out about Fleet & Family through someone who had a baby and took the class. While I was there, I saw what other services they provided. They are a great resource and I know they aren't the only ones. While I was stationed at Corry Station I found out they offer marriage counseling services as well....
Really all you have to do is ask and someone will know to point you in the right direction.
Really all you have to do is ask and someone will know to point you in the right direction.
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I advise waiting a while until you are able to make a purchase without having to pay sky high interest. I personally had needed a car when I was an e-3 a few years back. I thankfully did not get saddled into a multi-year contract. I got a loan for about 1 year that I was able to pay off and be done with it. The stupid loan company sent me a letter about keeping my allotment going and saving for my next car purchase. I pulled the plug on the allotment soon after receipt of that letter.
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Deborah Gregson
GySgt Stephen Anderson - Excellent points. I'm really old, from the days of paying with real checks. So when we switched to debit cards and electronic payments it was with the rule that we'd still use the checkbook register, that annoying book little old ladies fill out while you wait in line at Walmart. BUT it serves a magical purpose, keeping you from overdrawing your account and helping you budget and keep up with payments that are coming due. We write EVERY, and I MEAN EVERY, deposit into our account and EVERY debit from the account into the register and total it at the end of every day an action has been completed. I then check the online account to balance it with the register at least two to three times a week. It's a hassle, BUT we know how much money we have, can compare it to what bills and shopping we need for the next couple weeks, and that helps determine any disposable income for "treats" like movies, etc.
Second, 0% interest is the best choice for any loan. Be really careful though to be sure that you pay it off within the agreed upon time limit, or actually the month before the time period. Car loans at 0% are usually 60-72 months, and furniture or appliance loans between 12-36 months, and it's a great way to be able to buy what you need. But if you go past the agreed upon time limit then a loan percentage between 18-25% will be applied to the loan going ALL THE WAY BACK TO THE BEGINNING OF THE LOAN PERIOD ON THE ENTIRE AMOUNT OF THE LOAN, making what you owe significant. So pay attention and divide the amount you owe by the months of the zero percent you're promised minus one, and that should be your monthly payment (we just took out a loan for a Dell Computer, $1100 0% for 12 months, so we're paying $100/month so it will be paid off on month 11, since paying by month 12 will actually arrive in their office AFTER the original date of the loan period - thus triggering the 19% interest on the loan, see how that works?)
I totally agree about saving each month. Even if it's only $25, which is what I started doing in college with babysitting money. Through divorce, my husband having to pay child support to his ex, us buying and paying off our home, car payments (yep 0% ones and both paid off, over 12 years old), caregiving for two parents, losing jobs, medical issues, and all, we've been able to put away about $80,000 in retirement money. It's not a lot for both of us, but it's far more than we ever imagined by just squirreling away $25 or $100 at a time, taking bagged lunches, doing our own yard work, house cleaning and car washes, etc.
Suze Orman has great advice and info on living debt free, I highly recommend her.
Second, 0% interest is the best choice for any loan. Be really careful though to be sure that you pay it off within the agreed upon time limit, or actually the month before the time period. Car loans at 0% are usually 60-72 months, and furniture or appliance loans between 12-36 months, and it's a great way to be able to buy what you need. But if you go past the agreed upon time limit then a loan percentage between 18-25% will be applied to the loan going ALL THE WAY BACK TO THE BEGINNING OF THE LOAN PERIOD ON THE ENTIRE AMOUNT OF THE LOAN, making what you owe significant. So pay attention and divide the amount you owe by the months of the zero percent you're promised minus one, and that should be your monthly payment (we just took out a loan for a Dell Computer, $1100 0% for 12 months, so we're paying $100/month so it will be paid off on month 11, since paying by month 12 will actually arrive in their office AFTER the original date of the loan period - thus triggering the 19% interest on the loan, see how that works?)
I totally agree about saving each month. Even if it's only $25, which is what I started doing in college with babysitting money. Through divorce, my husband having to pay child support to his ex, us buying and paying off our home, car payments (yep 0% ones and both paid off, over 12 years old), caregiving for two parents, losing jobs, medical issues, and all, we've been able to put away about $80,000 in retirement money. It's not a lot for both of us, but it's far more than we ever imagined by just squirreling away $25 or $100 at a time, taking bagged lunches, doing our own yard work, house cleaning and car washes, etc.
Suze Orman has great advice and info on living debt free, I highly recommend her.
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Deborah Gregson
Thanks, and congratulations. You are right about borrowing against the equity of the home, it's not something to do. We have an open equity line of credit that we actually don't use, but it allows us to have emergency money available if we ever needed it for medical money. We'd never put more on it than the money we have in a savings account or retirement fund that we could pay off. I also agree that by doing these things our credit score is around the 850 level all the time. You and your wife will feel so free when that last 35K is paid off. It's such an amazing thing to know that your home belongs to you, because all other costs can be controlled. I hope others can learn from your example. Keep moving forward.
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