VA Personal Loan
A VA Personal loan can put you and your family in a home post-service, but mortgage loans for veterans aren’t the only type of mortgage that veterans can find. Many lenders work with government entities that provide post-military benefits such as the Department of Veteran Affairs as well as private companies to bring you the most affordable VA personal loan.
Whether you are a veteran or career retired from the U.S. military, you may find it difficult to adjusting to civilian life. Especially if you have poor credit history. If you have financial problems, or an emergency situation, perhaps you want to buy a car, or pay your bills, or maybe you’ve just retired from active duty or have been retired for several years, your military retirement pay and other income may not be enough to make ends meet.
For that stressful situations many lenders offer affordable veteran loan options with lower rates, giving you the financial support that the heroes of this nation deserve. If you are a military veteran, you qualify to apply for a veteran military loan featuring low fixed interest rates with upfront terms (and loan lengths of your choosing). A military loan for veterans finances anything from paying off your credit card bills to starting a new business.
You are eligible to apply for a VA personal loan, if you have served 181 days during peacetime or 90 days during wartime active duty, 6 years in the Reserves or National Guard, or are a spouse of a service member who died while in service, you are eligible veteran military loan.
A VA personal loan is an amount of money that an individual borrows to fund personal expenses. VA Personal loan come in many different shapes and sizes. Whether you need the predictability of a closed end loan or the flexibility of a line of credit. There are various criteria for VA borrowers to qualify, including credit scores and whether they put up any collateral.
Lenders use risk-based pricing for the interest rates they charge: risky lending (like credit cards) may have an interest rate of almost 30% while less-risky ones like mortgages can be as low as 5%. Payback terms may be as short as a matter of months while others can last 10 years.
You can choose between these types of personal loans that lenders offer to military service member:
VA Personal Loan: Fixed rate loan with predictable payment. Funds are dispersed when you sign your loan documents (“close” on your loan).
VA Personal Line of Credit: Funds can be drawn over time when you need them. Payment may adjust depending on balance of loan.
VA Secured Personal Loans: You could get a great loan rate simply by using your savings as collateral.
VA Personal loans can go since as little as $100 until $10,000. Many lenders can offer you a bigger loan amount, not to mention a quick and easy application process. These kinds of loans allow you to consolidate bills from other lenders, make home repairs, get new appliances or furniture, or pay for uncovered medical or dental expenses.
While it’s believed the VA makes home loans, this isn’t actually the case. Banks or lenders make the loans. The VA guarantees as much as 25% of the loan and puts some restrictions on what banks and lenders can charge for loans, but does not decide who gets a loan or how much they get. That is the banks and lenders’ responsibility. Still, the myth persists that a VA personal loan is made by the VA and it’s just one of many misunderstandings about finances among military members.
A 2014 survey by the National Federation for Credit Counseling (NFCC) found that military families had 7% more unsecured debt (about $400-to-$500 on average); about $11,000 less in tangible assets and spent $200 a month more on debt-related expenses than their civilian counterparts. According to the NFCC, the average military member who contacted a credit counselor had $10,000 in debt and 60% of the service members used payday lenders to help make ends meet.
It helps that there is a federal law (the Service-members Civil Relief Act) that offers a wide range of protections against financial disaster for people on active duty. Among other things, the SCRA caps interest rates on credit cards and mortgages at 6%, prevents lenders from foreclosing on homes and allows military personnel to cancel leases without penalty. Still, the youth and financial inexperience of many members of the armed services, especially enlisted personnel make dealing with debt a regrettable part of the experience.
Military Debt Consolidation Loan
When members of the military encounter a financial crisis, or even just hit a temporary wall, there are ways to rally, especially if you have a VA personal loan on your home.
Having a VA Personal Loan qualifies you for a Military Debt Consolidation Loan (MDCL), also known as a VA Consolidation Loan that can help you overcome financial difficulties. The MDCL operates on the same premise as a regular debt consolidation loan: take out one loan to pay off all unsecured debts, such as credit cards, medical bills, payday loans, etc. and make a single payment to one lender rather than multiple loan repayments to multiple creditors.
The MDCL’s are considered “cash out” loans. That means you are refinancing your current loan for more than the amount owed and taking the difference in cash. There are closing costs involved, which get subtracted from the final amount you receive. For example, if you owed $80,000 on your home, you might qualify for a $100,000 MDCL (depending on the appraised value of your house) and have $20,000 minus the closing costs left to pay off credit cards, medical bills or whatever other unsecured debt you have.
The VA is a guarantor for refinancing your loan, but the new loan value can’t exceed the appraised value of your home. Also, there is a limit to how often you take out VA loans if you have trouble repaying them. The advantage of a Military Debt Consolidation Loan (MDCL) is that you typically pay a lower interest rate and closing costs than civilians and far less interest than you would trying to pay the same bills with credit cards. These refinancing loans can be spread out over 10, 15, and sometimes even 30 years giving you a wide range of repayment choices, depending upon which lender you use.
The obvious drawback to this choice is that you lose the equity in your home, while taking on more debt. There also is the matter of paying closing costs, which vary depending on the lender. Other questions to ask should be whether there is a pre-payment penalty or if there is a balloon payment involved.
Be aware that you must also meet certain qualifications to help ensure that you can and will repay the loan. Lenders will take into account your income and credit score when determining your eligibility. You also need to realize that this process takes unsecured debt like credit card debt and turns it into secured debt. This means your home is acting as collateral and could be taken if you default on your mortgage.
Other Military Consolidation Plans
Depending on the circumstances and amount of debt you owe, there are some other avenues for military members to get relief. If your problem is confined to credit card debt, another debt consolidation option is to do a balance transfer to another credit card. Several banks and card companies are offering 0% interest on credit cards for as long as 18 months. Most of the offers have a transfer fee, which ranges from 3–5%, but if you pay off your balance in the introductory time period, you still come out way ahead.
Lawmakers and the Department of Veterans Affairs (VA) combine their knowledge, influence and funds to help veterans find work. Since World War II, programs like the Gi Bill have offered training and educational assistance to soldiers returning to civilian life.
Employers are the second beneficiaries of government-sponsored programs, receiving both financial reimbursement and tax credit for hiring veterans. Employers who hire veterans also benefit by gaining loyal, responsible and hard-working employees.
Returning Heroes and Wounded Warriors Tax Credits
The Protecting Americans from Tax Hikes Act of 2015 included an extension of federal tax credits for companies hiring returning veterans and those disabled in service. The extensions of the credits continue through the end of 2019.