<prompt> Human: I just completed my first year at the United States Military Academy in West Point, NY and have a question about taking out a loan my junior year. Okay, so I read a 2 year old post on this subreddit about the same question but want to expand on it a little bit and see if anyone has a different perspective. My dad teaches low income high school students basic math and has been showing them Dave Ramseys Foundations in Personal Finance videos. Hes making me watch them while Im currently on leave and honestly Im learning so much. One of the things Dave Ramsey stresses the most is to not get in debt by avoiding credit cards. I have no loans to repay or debt at the moment yay! and dont even have a credit card and dont plan to get one if I can help it. If youre unaware, my education at West Point is completely free. In fact, I get a 350 monthly allowance this upcoming year. My junior year it will be 450 and 550 my senior year. Like Dave Ramsey recommends, Ive put 500 into an emergency fund. Im also putting 50 of my monthly paycheck into a savings account which I plan to put into a mutual fund once I get the time soon. On top of that, I also have roughly 3,000 from unused book money and other things not illegal, dont worry. I think Im doing okay!Heres my big question. Junior year, USAA bank offers cadets a 36,000 loan at something like 0.5 interest... awesome! However, I would have to a get a credit card and b start paying that loan back once I graduate at 600 a month for 5 years... not as awesome. A lot of cadets spend it all on a huge truck or souped-up muscle car to overcompensate for having small penises, but I rather just save up like Ive been doing and buy a cheap used car for once I commission. If I were to take the loan, I would--as the previous poster mentioned--max out my Roth IRA and put the rest into a mutual fund that I could take out in 9 years once Im out of the army if I decide to leave. Because its not like a typical college loan I dont NEED the loan if I play it smart, I can always save up and buy a class ring and a uniform and other things its meant for. It would just be a nice way to immediately get a lot of money in mutual funds at a young age. I know Ive got over a year to think about it, but at the moment Ive quite hesitant because I dont want to start my adult life by having to repay 36,000. I did the math and if I kept putting half my paycheck into a mutual fund with the current 3,000 I have for it assuming the mutual fund makes 10 return thats 13,000 by the time I graduate in three years. Then, if I take the 600 per month Id owe the bank for 5 years and instead add it to the mutual fund I would have 65,000 by the time Im 27. Im sure the math is a bit wrong, but my point is instead of getting the immediate lump sum and having to pay the loan back I can always just not take the loan and do it by being smart with what money I already have. Im sure USAA will present a nice sales pitch on why everyone needs the loan, but maybe its not the best idea. After all, a loans a loan no matter how you look at it and I plan to never owe anyone money if I can help it. I dont know if any of you have had experience with a USAA commissioning loan, but Id be happy to hear anyones perspective and thoughts on the situation!tl;dr: As a West Point cadet I have the option of taking out a 36,000 loan at 0.5 interest my junior year. It would be a nice starting investment in a mutual fund, but not only is it generally not a good idea to invest loaned money but it also means I would have to pay 600 a month for 5 years. Should I take the loan, or should I just keep being diligent and add a couple hundred a month into a mutual fund instead?Assistant: One of the things Dave Ramsey stresses the most is to not get in debt by avoiding credit cards. I ... dont even have a credit card and dont plan to get one if I can help it.Dave Ramseys advice is overly simplistic and targeted towards people already in debt problems. Thus, credit cards are the devil!! but its not like that. Credit cards are simply a tool, and like any tool their goodnessbadness is directly related to how you use them. Is a hammer bad because you hit your thumb more often than the nail? No, its bad because you used it badly. Same with a credit card. So maybe reevaluate the Ill never get a credit card stance, and instead modify it to, Ill never charge more to a credit card than I can afford to pay, and I will always pay off my balance in full every month. Because then you can take advantage of rewards cash back, air miles, whatever and build your credit score while using credit cards as a buffer rather than the free money so many people think they are. you dont make that kind of money without knowing a thing or two about businessSure you do. Its called being in the right place at the right time. What advice is he going to give you other than, Go back in time and found Google with me? It doesnt hurt to ask him, but dont appeal to authority just because he got lucky once.Anyway, none of that is advice. Real advice? 0.5 interest is pretty damn good. Youd do better than that if you just took the money and put it in a CD for 5 years youd make 1.8-2. I wouldnt take the money to buy stuff you dont need, but it would be pretty tempting to take it for investment purposes. If you dont trust yourself with that see credit cards are the devil above, then dont do it. But Id personally do it and invest the money. Worst case, you invest conservatively, make 2 for 1.5 years, and then pay everything back and youll have earned 1000 on the money. Not a terrible deal for something completely hands-off.Human: Thank you for the reply. I do agree in part with what you say on credit cards. They definitely have their place, and like you said theyre dangerous if you cant afford to pay it back. Its easy for Dave Ramsey, a multimillionaire, to say I never use credit cards and only pay with cash because he has the money whereas most of us dont. I just dont want to get in the trap that my parents got into and now have to pay off lots of debt for a car and house and such. Theres definitely a lot to think about, but Ive got the time to think. I could always take out 20,000 or 15,000 loan and put it in a mutual fund and pay it off at 300 a month.  <response>: Its easy for Dave Ramsey, a multimillionaire, to say I never use credit cards and only pay with cash because he has the money whereas most of us dont.Thats not quite right, either. If youre using credit cards correctly, youll always have the cash for whatever youre charging on them. If you dont have the cash, you shouldnt put it on the card. Instead, youre using credit cards for three or more reasons:1. It provides a buffer between you and your cash. Assume you have an emergency fund sitting somewhere like Ally bank, where it gets 1 interest, but may take a couple of days to transfer to a usable location your main checking account. And assume you have an emergency that needs to be paid immediately. You could pay in cash, because you have it. Its just that you dont actually have it in hand for a couple of days. So you put it on your credit card, and then pay it off once the cash is free.2. It builds your credit passively. This is the cheapest aka, free and easiest way to build your credit score, by using a couple of credit cards responsibly for a long period of time. No other loan can do that for you. Why is your credit score important? See later ...3. Rewards. If you can pay 50 in cash for something, or put that 50 on a card that earns 5 cash back, you just savedearned 2.50. That adds up.So back to your original statement. Its not that Dave Ramsey has the cash on hand to pay only in cash. Its that hes got enough cash not to have to worry about larger purchases that would require credit by the rest of us mostly talking about a house, here, as you certainly can buy cars in cash if you save long enough. I seriously doubt Ramsey buys houses in cash, but where you and I need to have stellar credit scores to borrow money, his bank account vouches for him instead. He doesnt need to build up his credit score, but we do. And how do we do that? With credit cards.There is a caveat to the credit score thing, though, and that is, Dont worry about your credit score at the expense of anything else. If you use credit responsibly over a period of time, your credit score will take care of itself. If you dont use credit or you dont use it responsibly, you will be in for a rude awakening when you go to get a mortgage and you cant qualify for anything because your credit score sucks. Once you get up into the mid- to high-700s, fluctuations dont matter. So dont try to optimize credit score like some do here, but just keep in mind that consistently and constantly proving that youre a good credit risk will make you a good credit risk. 