If you are a military veteran (or still on active duty), there are several specialized loans for veterans that you can take advantage of. However, not all loans for veterans are created equal. Some are outright fraudulent and you should avoid them at all costs.
If you are looking at getting loans for veterans, the best place to start your research is the U. S. Department of Veterans Affairs benefits program. Additionally, here is a short list of the most popular types of loans for veterans.
Loans for Veterans: Home Mortgage Loans
The most recognizable of all loans for veterans is the Department of Veterans Affairs Home Loan program; also known as the VA home loan. This loan exists to help military veterans (and active duty personnel) buy a home.
Currently, the VA Home Loan program allows veterans to borrow up to $417,000 to buy a home. This amount can vary from location to location, depending on ‘cost of living’. So, it’s important to know what geographic area you want to buy a home in. This way, you know how much home you can afford when using a VA home loan.
To take advantage of this loan, the veteran or mortgage loan officer applies for a “certificate of eligibility,” or COE. The COE verifies both the availability of the VA Home loan amount and the veterans’ ability to use the loan.
The only downside to using this type of loan is the added cost of the “funding fee,” which the veteran must pay. However, this fee recently increased from 2.00 to 2.15%, and ties into the cost of your mortgage.
Here is how it works. Assume you want to borrow $300,000 to buy a home. The lender would then charge 2.15% of that amount, for a total of $6450 in fees. So the net amount you would have to finance would then be $306,450.
Consequently, it is important to keep this in mind, as fees will increase your monthly mortgage payment. In turn, your debt to income ratios will change, which could prevent you from qualifying for the loan in the first place.
As you can see, this type of loan for veterans can get pretty complicated. Nonetheless, it provides an extraordinary benefit to veterans. In short, the VA Home Loan Program is a legitimate loan with very little in the way of fraud or abusively-high interest rates.
For more information about these types of loans for veterans, visit the VA Home Loans page on the Department of Veterans Affairs website.
Loans for Veterans: Auto
The Department of Veterans Affairs (or any government agency), does not offer auto or personal loans for veterans. Yet, these types of loans for veterans are worth mentioning. There are plenty of non-government lenders that offer these types of loans for veterans.
The most prevalent type of loans for veterans on the marketplace today is auto loans. Almost every bank, credit union, and private lending institution offers these types of loans. But not all auto loans are the same. Beware the “paycheck” type of auto lender.
These “paycheck” type of lenders are the ones you usually see at a used car dealership. They make the claim that “anyone’ can get financed. All you have to do is provide proof of your military income. Usually, they will want one or two months worth of your Leave and Earning Statements (LES).
While this may sound like a great deal at first, these types of loans for veterans are predatory. They have sky-high interest rates, and generally, have a provision to allow the auto-dealer to garnish your pay. Meaning they can turn you into your chain of command and demand that they take the payment right out of your check.
These types of auto loans for veterans are best avoided. In fact, the Huffington Post wrote a great article on these types of financing companies. They are the infamous “buy here pay here” or “On-the-lot-financing” lenders.
Loans for Veterans: Personal
Third, we have personal loans. These types of loans for veterans are much harder to get. These loans are difficult to obtain because you first need a high credit score and established credit history. But, if you are considering this type of “signature loan” seek out a reputable lender, such as a bank or credit union.
At all costs, you must avoid “personal payday lenders.” These types of loans come with extraordinarily high interest rates. In fact, several investigations showed that they could be as high as 780% interest. In particular, here is a report by the Federal Trade Commission on this very issue. Always check with your chain-of-command. Many of these lenders are actually blacklisted by the military. Moreover, securing a loan from these types of institutions could actually land you in a Non-Judicial Punishment hearing – also known as Captain’s Mast, Article 15, or “Office Hours.”
Loans for Veterans: Hardship Loans
As a military veteran or active duty personnel, you will more than likely wind up in a stressful situation where you need some extra money. Hence, the sheer volume of payday lenders near military bases. However, before going to a payday lender for a personal loan you should know there are places you can go to for help. In other words, there are alternatives to these high interest rate loans.
If you are still active duty (and sometimes even if you’re a vet) check with your local relief society. Particularly, the Navy and Marine Corps Relief Society, Air Force Aid Society and Army Emergency Relief. These agencies offer interest-free loans for veterans. They also offer grants (which are loans that you don’t need to pay back.) These loans for veterans are for short-term or one-time emergencies. For instance, you may need help paying for food, rent, car repairs, or emergency travel. So, if you find yourself needing a hardship loan, check with your local relief society first. Additionally, if you are a veteran, you can check with the American Red Cross.