A local banker and retired Soldier wants to help today’s service members with their finances.
Ron Taylor, the senior vice president of Fort Hood National Bank, has lots of experience helping Soldiers, both as a Soldier while serving with the Consumer Affairs Office, the agency commonly used by service members to lodge a complaint against civilian businesses for unethical practices) during his last five years of service, and more recently as a banker.
Taylor has seen the many pitfalls that service members and their families encounter, but says there is hope for anyone willing to learn about good money management practices.
“The biggest downfall that I see is many Soldiers don't know how to manage their finances to begin with,” said Taylor. They weren't taught good financial habits by their families, and it's not really something the Army focuses on unless there becomes a problem.”
According to Taylor one of the biggest financial pitfalls is when a Soldier new to the installation buys a vehicle right away.
“Most young Soldiers are more interested in the way a vehicle looks than the functionality and cost of the car payment,” said Taylor. “What they don't realize is even if they get approved for a vehicle loan, their interest rates will most likely be high since a lot of new Soldiers have very little credit history to begin with, and due to the average age of most new Soldiers their insurance rates are often very high.”
Although there isn't anything they can do about their age, understanding how a credit report works is key to their borrowing ability, said Taylor.
“A credit score is like a report card on your trustworthiness to pay off a loan,” said Taylor. It's based on your income to debt ratio, the length of time that loan has been paid without missing payments as well as many other factors. The more positive this score is the better interest rates you can expect when purchasing a vehicle or any large purchase.”
Even after getting approved for the loan, keeping a good score is just as critical for future purchases.
Always pay more than the minimum balance on your credit cards and other loans if possible,” said Taylor. By paying more than minimum amount due you can take time and money off the loan over its duration.”
Taylor recommends Soldiers keep a close eye on their credit card statements when it comes to paying the minimum balance.
“The statement will show you how long and how much it will take to pay off the balance by making minimum payments,” said Taylor. The more money you apply to the principal of the loan is money that you'll save in the long run when paying off the interest.”
Not all service members are just starting out establishing credit, and for many their credit score may not be great or even good, but Taylor has some advice for them as well.
“The best thing a Soldier rebuilding their credit score can do is start making all their payments on time for at least 12 months. If you're having trouble making high interest payments many financial institutions will often work with you to come up with an affordable payment plan that works for you as well as them. All they're interested in is recouping their money and you're just as capable of being able to negotiate with them as a consumer debt relief agency.”
If you've made your payments on time and still have a negative mark on your credit report don't be afraid to dispute it, said Taylor.
“They've only got 30 days to respond to the complaint, and if they fail to do so they have to return the points that were deducted from your score,” said Taylor.
Call debtors and try to set up a payment plan as soon as you realize that you won't be able to keep to the current plan.
“By the time you're contacted by a debt collection agency your options are pretty limited,” said Taylor. They're looking for a lump sum payment and are less willing to work with you.”
Taylor said he never recommends filing for bankruptcy.
“When you file for bankruptcy you're basically dead credit wise for up to 10 years depending on the chapter,” said Taylor.
He said, you automatically loose 500 points off your credit score, and it kills your potential to purchase a home for that period.
Taylor said, if you're facing that kind of pressure then desperate times call for desperate measures.
“Cut up your credit cards, but continue to pay off the balance to best of your ability,” said Taylor.
If you're feeling over your head and don't know what step to take next, Taylor said that he'd love to talk to you.
Taylor gives classes on financial understanding and preparedness free of charge to interested units on Fort Hood. You can contact him via email at Ron.Taylor@fhnb.com or by telephone at (254) 532-2493.