Central Texas is home to a number of bases, including Fort Sam Houston, Lackland Air Force Base, and Randolph Air Force Base, as well as other military installations such as Camp Bullis and Camp Mabry. If you’re one of the thousands of service members that have made their home in the area, you might be familiar with the unique set of financial challenges that come with being a member of the military.
Both the government and private financial institutions offer programs designed to help active military meet their financial goals. In this article, we’ll break down the basics of military loans, some of the programs available to you, and how to qualify for various loans.
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Loans Available to Members of the Military
One of the benefits of obtaining military loans versus standard civilian loans is the bit of extra leeway that they offer. Many times, lenders of all these military loans will be more flexible and willing to work with you to come up with specialized plans if situations such as deployments arise. Let’s take a look at what you can expect from four major loan categories: home mortgages, auto loans, personal loans, and student loans.
VA Loans and Mortgage Options
The Veterans Administration has a VA direct loan and three different VA-backed loan offerings for service members to buy, build, improve their home, or refinance their current home loan. With a VA direct home loan, you’ll work directly with the VA to obtain and manage your financing.
With a VA-backed home loan, the government will guarantee the loan that you obtain from a private lender. This means that if you fall behind on your payments and your home goes into foreclosure, the bank can recover some of their losses. Because lending a VA-backed loan is less of a risk for a lender, you may be able to get better loan terms and interest rates. To qualify, you’ll need to obtain a Certificate of Eligibility from the VA. The VA doesn’t set a minimum credit score, but individual lenders usually require a FICO score of 620 or higher.
Many private institutions also offer their own programs which might include lower interest rates and other exclusive benefits.
Military Auto Loans
Though there are no government programs for auto loans, active duty and retired military may be eligible for lower interest rates, special discounts, waived fees, and more. Lenders may also loosen credit requirements, meaning that you can still obtain a loan even if your credit score is less than stellar. On top of this, military personnel may not have to put down as large of a down payment on the vehicle.
You can look for these auto loans through private lenders and financial institutions that specialize in serving people in the military.
Military Personal Loans
There are no government-backed personal loans for military members, but similar to military auto loans, there are lenders who specialize in giving active and retired service members personal loans with better terms and greater flexibility. Personal loans put money in your pocket that can help you accomplish any number of things from moving to consolidating expensive credit card debt.
Student Loans for Military
There are benefits for members of the military when it comes to their federal student loans. For example, active-duty military members have the ability to defer payments. In some cases, you may even qualify for repayment programs in which your branch of the military will assist you in paying off your loans.
How to Qualify for a Military Loan
As with any other type of loan, military loans are subject to lender approval. Just because you apply doesn’t mean that you’ll qualify. While requirements may offer more flexibility than traditional financing, you’ll still need to be able to demonstrate that you can repay what you borrow. In order to get approved, you will need to provide:
- Proper identification. Valid identification is needed to ensure that you are who you are claiming to be.
- Certificate of Eligibility. For loans such as a VA home loan, you’ll need to present an official Certificate of Eligibility, which is issued by the Veterans Administration.
- Your credit report and score. A credit report will reveal things such as how much debt you have, your repayment history, and how long you’ve had credit. All of these factors are things that a bank will consider.
- Proof of income. Banks want to make sure you make enough money to make the monthly payments on top of all of your other bills.
- Tax returns. Financial institutions often require you to sign a document that gives them access to your tax returns from the IRS.
- Proof of assets. You may also be asked to provide bank statements that show how much money you have saved up.
What You Need to Know About Predatory Lending
Being in a tough or urgent financial situation may make you more susceptible to predatory lending. A predatory lender will take advantage of a borrower, convincing them to accept unfair terms through deceptive, exploitative, or coercive actions. The result is often taking on a loan that you can’t afford, which leads to things like foreclosure.
Here are a few tips you should be aware of to avoid predatory lending:
- Be wary of unsolicited loan offers from unlicensed and uninsured financial institutions
- Even though you’re a service member, banks will not take huge risks. If your loan terms seem too good to be true or you’ve been approved for an amount that you know you can’t afford, this is a red flag.
- A bank should never pressure or rush you into making a decision.
- Always carefully read over any loan documents that you sign. Contracts should never have blanks that could be easily filled in or changed later.
If you have or are currently serving in the military, it pays to do research into special programs that may be available to you. They may be able to save you money or offer you flexibility that ordinary options don’t offer. It also helps to work with an institution that understands the unique challenges that come along with being a member of the United States military.