Does Navy Federal Offer Classic Car Loans?

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You are a vet, and you’ve found a classic car you love, but you will need a car loan to get it. Does Navy Federal offer classic car loans?

Navy Federal has some of the best automobile rates around. They have been helping veterans and their families finance home and auto loans across the country for years. And while you might wonder if the lender has any stipulations about these kinds of loans, it’s best to know. Many banks will not finance older model cars or trucks, mostly because the bank knows that the car's resale value is not even close to what may be needed for the loan. So rather than demanding additional security to back up the loan request, they just don't fool with them.

Navy Federal will finance autos over 20 years old but will subject them to collateral loan rates. Namely, the Credit Union will require you to put up something other than the car (savings, home, or other paid-for vehicles) as security toward the loan if you are unable to repay.

Unfortunately, NCFU does not publish what those collateral rates will be, so you will have to do more than just check figures on the Internet. You will need to apply and allow their underwriters to assess the vehicle's value and suggest exactly how much the collateral should be. (You must also have a direct connection to the US Armed Forces or the Department of Defense even to be considered for a loan with Navy Federal). So what to do? Should you stick with your bank or go with the Navy Credit Union and finance this classic you love?

Well, we have some answers to help you understand a collateral loan and whether it is best for you.

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Does Navy Federal Credit Union Offer Classic Car Loans?

According to the fine print of their website, there are two types of used car loans that Navy Federal offers. One is for Late Model Vehicles that fall within the past two years (2021, 2022, or 2023 models with 7,500 - 30k miles on them). The second category is a used vehicle loan for the 2020 model year or older that has over 30,000 miles. Late-model vehicles with less than 7,500 miles are subject to new vehicle rates.

As of June 22, 2022, Navy Federal per month designation offered the following rates.

Situated below the chart for current rates is this caveat:

‘If the vehicle is 20 years or older based on the model year, the vehicle is considered classic or antique and subject to collateral loan rates”. (NFCU website).

What is a Collateral Loan, and How Does it Work?

A collateral loan is precisely what its name implies: the borrower must put forward collateral (something of value) to secure a loan. The item can be anything of substance (but is subject to the bank’s approval), like equity in a home, a paid-for car or other RV, boat, or other valuable possession, or even a secured savings account.

The bank will require you to prove that you are the rightful and sole owner of the collateral you intend to use for the loan. While the easiest way to demonstrate this is by using a bank account in your name, other items may require a copy of the title, showing that you own it and that the item is free of any other encumbrance (or lien). The lender may also use its appraiser to assess the value of the items you are offering.

What are the Advantages of a Collateral Loan?

The primary advantage for the bank is that the item secures the loan and reduces the bank's risk. Banks are usually very cautious when lending money (which is why they decline to finance people with less than perfect credit). By securing collateral at the loan’s signing, the bank knows it has an item to secure and resell to satisfy the loan should you default.

The advantage for the borrower is that it allows you to use something other than the value of the car you are financing to get the loan. Most existing car loans (both new and used) put a value on the car you are trying to finance and then will loan you a percentage of that residual value (some banks will finance more than 100%). So if the classic car you are considering is in a less than perfect shape, or a potential project, you can get money to buy and restore it by offering the bank something of value that isn’t the rusty heap of scrap in a garage. (Even better, you don't have to try and convince your uptight banker to see the dream you have for the ‘71 Baracuda).

What are the Disadvantages of a Collateral Loan?

For the bank, there isn’t a negative, other than they have to go through the process of reselling the item you put up to secure the loan.

The primary downside for the borrower is that you will have to surrender whatever you put forward as collateral if you fail to make the scheduled payments on the loan. (This is why you should not put up anything for a loan you do not want to lose. The bank may have severe limitations on what they accept because they don’t want to put you in that situation either).

Like any loan, the bank will consider your loan in default if it is over 30 days past due. Legally, that means the bank can seize any collateral covered by the loan, which means they could freeze and liquidate the funds you have set aside. Most lenders will work with you if you have problems repaying your loan payments, and it is always best to be honest with them if you are.

Another downside to a collateral loan is that you cannot do anything with the item or the funds you have offered the bank to secure the loan. That means you cannot use the secured funds as an emergency fund or spend them on that cruise you’ve wanted to take. You violate your loan agreement if you use your father’s Rolex to secure the loan and then try to pawn it. (Don’t be surprised if the bank makes you take out a safety deposit box and requires you to keep the item on their premises until the loan is satisfied).

What Does a “Collateral Rate” Mean?

The bank simply tells you that they reserve the right to charge whatever rate they feel the project merits. At times, securing your loan with something tangible can lower the interest rate, but not always. Financing a classic car will mean you will pay a higher rate than what they offer online for financing a used car.

What Are Some Things I can Offer as Collateral?

It depends on the bank, credit union, or pawn shop you are dealing with. Each will have limitations on precisely what kind of collateral they will accept. Some lenders will not allow you to put up your home, other cars, or even heirloom jewelry. While NFCU does not publish what they accept online, a call to a customer service rep can probably get you the information you desire.

Does Navy Federal Credit Union Offer Personal Loans?

Yes, they do. NFCU will offer its members personal loans, debt consolidation loans, home improvement loans, and even business loans, depending on your need. While the interest rates are much higher for these types of loans, this may be a better option for you than a collateral loan. A visit to one of their local branches and a discussion with a customer representative can help you decide which approach is best for you.