Military Financial Tips #3 Predatory Lending

Predatory lending and the military have probably gone hand in hand  since the first professional military. The reason why: It’s a matter of public record how much you make and the dates you will be paid.

I remember when I was a young Marine going to a mall off base in Meridian, Mississippi. A friend and I were approached by jewelry salesmen and I watched my buddy get talked into a $0 down payment on a bracelet for his mother and used the store’s computer to log into his MyPay payroll account to set up an allotment to repay the financed jewelry. A couple of days later he realized that the interest rate and the term of the loan he would cost 150% more than what the bracelet was worth. Fortunately that is illegal now thanks to the Military Lending Act (MLA) but similar tactics still exist.

Gone are the days that a service member can get a payday loan or use the payroll allotment system to pay back financed loans. Salesmen still use their knowledge of service members base pay and pay dates to leverage their sale pitch. The most common these days are car sales but can apply to just about anything. The sales pitch will probably go something like this:

Car Salesman: “Are you in the military?”

Private First Class (PFC): “I’m a Marine, Rah!”

Salesman: “I thought so, you look like a Marine. So what brings you here today?”

PFC: “I just got to my first duty station and need a car so I can get away from base on the weekends.”

Salesman: “You got a girl you trying to see?”

PFC: “Not yet, that’s why I need a car.”

Salesman: “Do you like BMW’s? BMW’s are panty droppers you know.”

PFC: “You are talking my language, what do you have?”

Salesman: “We just got this beaut in today. Its only a year old so it’s like new. Sticker price was $40 thousand new but I’ll knock it down to $35k since you are in the military.”

PFC: “I did Math for Marines, that sounds like a lot.”

Salesman: “We do special Military Financing so your payments will be really low. Lets see, you make $1800 a month. That’s split to $900 on the 1st and 15th. With our special loan offer it will only cost you $400 a payday.”

PFC: “Wow, that will still leave me with $500 each paycheck!”

Salesman: “Exactly, and after 72 months she will be all yours”

PFC: “Where do I sign?”

Hopefully there wasn’t too much military jargon in this scenario. It will be funny to senior military members because they can probably visualize this and know that it happens almost verbatim.

When shopping for something that needs to be financed avoid these promotional RED FLAGS:

  • “Special Military Financing”
  • “Military Friendly”
  • “All Services Welcome”
  • Special consideration for being in the military.

I feel these types of promotions/advertising are unethical as it treats military members like targets. If you visit a legitimate business you should ask for a discount, not be solicited one.

One final thought. Being in the military doesn’t make you special in the eyes of the credit bureaus. Your FICO score is still earned like everyone else. If you need financing go to your bank and apply for what you can afford, not what you want. Having some debt and living within your means is fine as long as you are being responsible with your finances. If you are seeking Financial Independence then save for what you want and pay cash, you will be glad you did.

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