Success with Steven: Navy Federal Pledge Loan Strategy

Overview

• Presenter: Steven Smith
• Topics: Business strategies, financial literacy, personal finance
• Specific Focus: Navy Federal pledge loan strategy

Key Points

What is a Pledge Loan?

• Definition: A secured installment loan where you borrow money against your own money, like a secured credit card.
• Collateral: The money you use as collateral is placed in a savings account and returned to you as you pay back the loan.
• Institutions Offering: Navy Federal, sometimes referred to as a secured savings loan.

Benefits of Pledge Loans

• **Credit Score Increase: **By paying off the majority of the loan quickly, it appears on your credit report, boosting your credit score.
• Internal Score Boost: Helps increase your internal score with Navy Federal, making it easier to get other products and services.
• Ease of Use: Simple process with funds moving between your accounts, no risk to the financial institution.

How to Get a Pledge Loan with Navy Federal

1. Membership: You must be a member of Navy Federal.
2. Application: Call Navy Federal to specify the desired loan amount.
3. Funds Transfer: Move money into your Navy Federal savings account.
4. Loan Creation: Loan is created in a few days and appears in your online account.
5. Documentation: Sign and approve the loan documents sent by Navy Federal.
6. Funds Return: Money is moved back to your checking account.

Loan Limits and Terms

• Max Loans: Only 4 pledge loans per savings account.
• Loan Term: Longer loans provide better benefits, up to 180 months (15 years).
• Interest Rate (APR): Typically around 2-3%.
  • $250-$500: 6 months at 2%
  • $501-$1,000: 12 months at 2%
  • $1,001-$1,500: 18 months at 2%
  • $1,501-$2,000: 24 months at 2%
  • $2,001-$3,000: 36 months at 2%
  • $3,001+: 60 months at 2%
  • $3,001+ (61-180 months): 3%

Practical Tips

• Longevity Helps: Longer loan terms offer better credit benefits.
• No Multiple Loans Needed: One lengthy pledge loan is preferable.
• Application Method: Can only be applied for in-branch or over the phone, not online.

Advantages of Pledge Loans

1. Higher Approvals: Likely to receive higher loan and credit card limits.
2. Internal Score: Builds a higher internal score with Navy Federal, useful for acquiring other Navy Federal products.
3. Comprehensive Boost: Helps improve overall credit profile, affecting all types of loans.

Considerations

• Not One-Size-Fits-All: The usefulness of this strategy depends on your current credit profile.
• Specific Strategy Tool: Best used as a tool for credit building, especially beneficial for new members or those loyal to one bank.
• Cost-Benefit Analysis: Consider the APR costs versus the long-term credit benefits.

Credit Hack Explanation

• Not a True Hack: Simply a strategic method to boost your credit score.
• Action Steps: Pay back 80-90% of the loan to see a credit score increase.
• Cost: APR costs are minimal compared to credit benefits.
  • Example: $30,000 loan at 3% APR = $900 over 15 years

Credit Score Breakdown Benefits

• 35% On-time Payments: Locked in with a long-term loan.
• Credit History: Benefits from longer account life.
• Credit Mix: Improves credit mix by adding an installment loan.
• New Credit: Affects part of your score positively.
• Utilization Rate: Not directly impacted by this type of loan.

Becoming a Member of Navy Federal

• Eligibility: Roommates, family members, and lineage members of military personnel.
• Non-Hack Method: Various legitimate ways to become a member.

Conclusion

• Overall Benefits: A great credit-building tool, especially for those new to credit or loyal to Navy Federal.
• Community Benefit: Credit unions operate in the best interest of their members, offering competitive rates based on member activity and responsibility.
• Call to Action: Engage with the community to share experiences and tips for using the pledge loan.