Hey all,
I'd appreciate any insights on this: I am a pretty debt-averse person as it is and can't seem to find a good reason to use the career starter loan. Am I missing something?
I have a reliable, paid-off car. I have a decent amount of savings and investments. I don't have any big purchases coming up in the near future (next ~3 years). Previous posts I've read here suggest taking the loan and putting into a HYSA (or equivalent) to make some money on the interest, but rates aren't that great at the moment. That said, I know opportunities to borrow money this cheap are few and far between. I don't "need" this loan, but because of how good the deal is, I'm a bit tempted to take it now and find a use for it later.
I have a year to think this over, but I'd appreciate your collective thoughts in the interim. What do you think?
TIA
Is there a good reason for me to take the career starter loan?
byu/Empty_Pattern7240 inMilitaryFinance
Posted by Empty_Pattern7240
6 Comments
If you’re like Dave Ramsey levels of debt averse, then don’t take it.
Personally, if I could go back in time with the knowledge I have today, I would take it out and put it all in the stock market. If you’re good for the payments and still have room for additional savings, doing this will give you a good head start on your wealth accumulation.
If you’re really set and don’t want the debt, then don’t do it.
I wouldn’t invest in a HYSA, but a broad index ETF like VOO. It would be a great way to jump start your Roth IRA, slowly adding the whole loan over the next few years.
What is the rate of the loan?
Its probably the best loan you can take IF you can earn enough plus more to cover that interest and payment and make some money. I have never seen another loan at a lower APR than that. I used it to cover debts and am almost done paying it off. Im sure there’s better advice out there though. Look into and see if its worth it for you.
Do you have grown up stuff like furniture?
If not, a good use for some, but not all, of the loan is to help you purchase a full complement. It kind of sucks having to scrimp for a few months just to buy all the stuff even a modestly furnished apartment needs to be functional, and it makes life easier to just buy it after you report rather than get it moved from somewhere. Taking a loan to buy depreciating assets is a bad idea, but this would be the second least bad (after a car which you have).
Do you want to max your TSP and a Roth IRA your first year?
The loan can also help offset the income you would use to do things like max out TSP and a Roth IRA. Assuming you commission in the summer, it can be prohibitive to do so purely from your pay in less than a full year. The loan can provide you the money to live on while your income funds those accounts. Taking a loan so you can buy investments is a bad idea, but this is probably the least bad way to do so.
Use it to start your IRA, if nothing else. You will never borrow money this cheaply again.