Find the Best Personal Loan for Your Needs
Being a veteran is tough, but what is tougher is the transition from military to civilian life. It has been found by some that serving in the military post 9/11 is more difficult and emotionally traumatic for veterans.
Several factors decide if the veteran is able to transition to civilian life without any difficulty. Suffering a traumatic event while in the military, being severely injured, serving in combat, and witnessing someone killed in war are some of the factors that make transitioning to civilian life tough for veterans.
Another crucial factor that makes transitioning to family life difficult for veterans is facing financial issues even in the midst of tax cuts and a booming economy.
Almost all veterans have some difficulty with finances once they find themselves in civilian life again.
Loss of military benefits and difficulty finding a job are some of the most common challenges faced by veterans once military life is over. There are several perks that veterans and their families enjoy during the time in the military.
Once someone’s military service is over, some perks such as tax-free housing allowance and other tax advantages go away. Even though this person is now a veteran with certain benefits the benefits are not the same as when they were active.
Since the time served in the military can be long (but normally is not), veterans can get used to a life of benefits. Once they have to settle into a normal life, they face various struggles including financial issues just like everyone else.
With their lack of a college degree (though some have degrees and most officers have degrees) or other emotional issues veterans often find it difficult to get a proper job to support their families.
Making the right choices
Housing, healthcare, and other taxes create pressure. Saving for the future, sending children to college, or starting a business are some of the challenges faced by military veterans, often forcing them to open the door for a personal loan for veterans.
A personal loan can be taken for anything, from making home improvements to getting married to children’s education to paying medical bills. And all of these may be necessary for a veteran.
While serving in the military, the veteran may not have been able to have time to get married or make home renovations.
After coming back to civilian life, they may also need medical treatment for injuries or emotional issues but not have enough money to pay for all these requirements. A personal loan helps pay for these types of expenses, and there are also various benefits available for veterans.
Types of personal loans
The Department Of Veterans Affairs has a very flexible home loan program for veterans and their families. In fact, the VA home loan is considered one of the biggest benefits of being a veteran. There is usually no down payment, no limitations on closing costs, no monthly insurance premiums to pay, and lower than average interest rates.
But when it comes to personal loans for veterans with bad credit, veterans often get confused about their options. The truth is veterans have as many options in personal loans as any other individual and may often have a lower interest rate. You only have to choose the best type of loan for your needs.
This may often be the veteran’s first experience with any kind of loan. The various options can well make the veteran overwhelmed and confused about the next step.
The good news is taking a loan as a veteran has the same process as any other person. In some cases, we may also get a lower interest rate. With that said let’s take a look at the types of personal loans that you can avail of as a veteran.
This type of personal loan has no collateral requirement. You do not have to keep your house or car as collateral to be able to qualify for an unsecured loan. On the flip side, you must have a credit score higher than 700 to be eligible for an unsecured loan because of the risk to the lender.
If the borrower defaults on an unsecured loan, the lender has no recourse like repossessing the mortgaged vehicles or foreclosing a home loan. Unsecured loans are as much a risk to the borrower as to the lender.
The loan amount may be limited, and the terms and conditions may make it hard for the veteran to repay the loan. Unsecured loans are usually chosen when the borrower has no asset to keep as collateral but has a good credit score.
As the name suggests this type of loan is secured with collateral. The collateral in a secured loan can be anything from property to vehicles to stocks and bonds.
This collateral is a legal recourse for the lender in case the borrower defaults on the loan. The interest rates are generally lower in a secured loan compared to an unsecured loan.
Your credit score may also be under 700 to qualify for a secured loan. However, secured loans come with their own risks. If the loan is not repaid according to the terms and conditions, the lender has full right to take possession of the collateral.
This type of veteran personal loan involves a fixed amount that is repaid in periodic installments over a certain duration. Installment loans may be both secured and unsecured. A class example of installment loans is a home loan.
They have a fixed interest rate that needs to be repaid in equated monthly installments over a few years. If you have a one-time expense like buying a home or paying off medical bills, an installment loan is a good choice because of the fixed interest rate and the specific period of repayment.
Line of credit
This loan is best for recurring expenses like medical bills or college tuition fees. A line of credit is much like a credit card where you are lent a certain amount of money that you can use up to the maximum credit line.
For example, you may borrow $10,000 and use only $5000. In that case, you pay interest only on the amount you have used. Lines of credit are very useful for veterans who want to start a business.
A line of credit is effective in paying of recurring expenses without paying additional interest rates. They are easy to qualify for and do not have the stringent terms and conditions like several other types of loans.
Much like a line of credit, a credit card also lends you a fixed amount, and you have to pay interest only on the amount that you spend. Credit cards are actually a very popular loan type, even though they aren’t really considered loans.
You can use a credit card to pay for various expenses like shopping for goods and services. Keep in mind that credit card interests are variable. If you do not keep track of your spending you can end up with a long bill at the end of the month.
Cash advances are quite similar to a credit limit, except that the amount can be withdrawn in cash from an ATM or a financial institution. Again, if the spending is not limited, then the bill can be very high.
Lenders catering to veterans
More often than not veterans find themselves in a tight financial spot after coming back from military service. Money is almost always one of the biggest problems veterans face when returning to family life.
Most of these conventional loans and lenders seek a high credit score for personal loans. However, veterans may not always have good credit. This is when federal institutions are a great help in providing financial assistance to veterans.
The reason why federal lending institutions are more preferred for emergency personal loans for veterans is because there is a law that limits interest rate up to 6 percent for veterans. This is often is a big relief for someone in urgent need of money.
The following are the federal lending institutions that cater to veterans specifically:
The Navy Federal has over seven million members and is free to join active duty military, veterans, defense civilian employees, and families of current members.
The USAA bank is one of the largest federal lending institutions in the country. It is free for active military personnel, veterans, spouses and surviving spouses of members, children of current or past USAA members, and former USAA members.
USAA loan amounts range from $2,500 to $50,000, repayment periods ranging between two and seven years, and interest rates between 8.99 percent and 18 percent. If you have good credit, you may even qualify for the lowest rate of 8.99 percent. Besides loans, the USAA also provides resources and assistance to veterans.
Air Force Federal Credit Union
If you are an Air Force veteran, one of the best places to get a loan from is the Air Force Federal Credit Union. Current and retired military personnel, spouses and children of members, and civilian employees of members can join for free.
The bank offers various types of loans, including auto loans, home loans, and veteran personal loans with bad credit. Besides loans, members also get assistance with tax preparation, debt management, and financial planning.
Eligibility criteria for personal loans
Like every type of loan, there are various eligibility requirements for personal loans. Even if you are a veteran there are several eligibility requirements that you must meet in order to qualify for a loan.
Whether you apply for a fixed rate or a variable rate, secured or unsecured loan, the following are the five top eligibility requirements that you must meet in order to qualify.
It goes without saying that a loan must be repaid at all costs. If you don’t have any income, there is no way you will be able to pay off a loan. This is the most vital criterion for qualifying for a personal loan.
As a veteran, if you do not already have steady income, you must show that you receive government benefits. This is when unsecured personal loans for military veterans are a good option.
For most loans, your credit score is a vital requirement. For bigger amounts, you will need a credit score higher than 650.
For smaller loans, especially those easy to qualify for and with flexible terms and conditions, often require a credit score within 500. If you do not have a good credit score and not enough time to fix bad credit you may apply for a personal loan from any federal lending institution that have special provisions for veterans.
This is the main difference between secured and unsecured loans. Although secured loans give you a safety net, when applying for it, you have to list the collateral you want to provide for the loan.
This collateral can be repossessed by the lender if you default on the loan. If you don’t own anything such as a house, vehicles, stocks or bonds, then you may not be able to qualify for a secured loan because there is no collateral to provide.
In that case, you may have to settle for unsecured personal loans for veterans, where the credit score is the deciding factor. If you have bad credit, then your last resort is some form of government assistance for veterans.
Assets and debts
Your debt to income ratio is calculated when applying for a personal loan, whether it’s secured or unsecured. This is because the lender wants a guarantee that you’ll be able to repay the amount.
This is why you are asked to list assets, debts, and expenses when making an application for a personal loan, which lenders use to calculate your debt-to-income ratio (DTI). The higher your income, the stronger your chances of getting approved quickly.
If you have debts like credit cards, department store cards, and other loans, your application will be delayed and hindered. Make sure to gather your identification documents, bank statements, and other proof required along with the application.
Applying and qualifying for a loan may seem like a daunting task, but things can get easy for veterans. Whenever in doubt, do not forget to consult a loan professional who will explain all the benefits that you are eligible for as a veteran, and also point you to the right lender.
Robert is our in-house expert on personal loans and finance. He got an MBA, specializing in Finance, before joining the workforce. After working for multiple Fortune 500 companies in the past decade, he brings a wealth of knowledge and experience to the table.