If you are serving in our military or did so in the past, you probably know that you can get some well-deserved perks in terms of favorable mortgage terms and local discounts. But what if you need help dealing with your debt? If you’re considering a debt consolidation loan, you may be able to take advantage of special terms offered to veterans by banks and credit unions. These can be in the form of lower interest rates and advantageous terms.
Sure, you could search online for “best debt consolidation loans for veterans” and check out each lender’s available offerings. But since shopping for a loan can be a time-consuming process, it’s good to educate yourself so you can be targeted in your approach. In this article, we’ll break down the various elements you’ll want to evaluate. The criteria are similar to what civilians look for, but there are differences specific to the military community. Equipped with this intel, you’ll be ready to research, make a decision, and fill out your loan application.
Best Debt Consolidation Loans for Veterans
The following are some of the best lenders for veterans. Some of these have programs just for veterans; others offer excellent terms for the general public that are worth exploring. The size of the loan and the terms (including the interest rate) will vary with your financial details, such as your credit score. You may be able to lower your rate by signing up for autopay. (One note: Some of these lenders refer to their product as debt consolidation loans, while others use the term personal loan. They are still talking about the same thing.)
- Navy Federal Credit Union: Offering loans of $250 to $50,000, with terms up to 60 months.
- USAA: Currently offering loans of $1,000 to $100,000 with terms up to 84 months.
- PenFed: Offering loans up to $50,000 with terms up to 60 months.
- SoFi: Personal loans of $5,000 to $100,000, with terms up to 84 months.
- Lightstream: Currently offering $5,000 to $100,000, with terms of up to 60 months.
Criteria for “Best Debt Consolidation Loans for Veterans”
What makes one loan better than another? Interest rates are one way to compare them, as are loan terms and fees, all of which contribute to the overall cost of the loan. As a veteran, you could benefit because lenders sometimes offer special rates or waive or reduce such variables as origination fees and closing costs.
So, you will want to scrutinize the details of a loan. That includes the available terms in months and any penalties built into the loan agreement for early repayment. The best debt consolidation loans for veterans have simple terms, no penalties for paying the loan off early, and reasonable repayment periods.
Also, as you search, you may be surprised that some of the names involved are not your local bank. A good example of this is USAA. They’re primarily an insurance provider, but they also offer banking services. Check their rates for comparison purposes.
A not-so-simple but equally important aspect of getting a debt consolidation loan is the quality of customer service at the lender. As you interact with the financial institution, take note of how responsive and respectful they are. You will likely want a lender that responds quickly, thoroughly, and cheerfully to your inquiries, as well as offers up-to-date ways to stay in touch with your prospective loans. That means eyeballing their website and app, if available.
Assessing Eligibility and Accessibility
Here’s a major point to consider: Veterans may be eligible for interest-free loans. That’s determined by the lender and may be dependent upon the active-duty status and/or credit score of the loan applicant. This is one of the questions you’ll want to ask at the bank if you’re a veteran looking for a debt consolidation loan. The amount of debt you want to consolidate may also be a factor.
(In addition, if you hold a VA loan, you may want to look into an MDCL, or military debt consolidation loan, or a VA Consolidation Loan, as it’s sometimes known. This is a mortgage cash-out loan, drawing upon your home equity to pay down debt.)
The accessibility of the lender is also important. Doing business with a brick-and-mortar bank with one branch might not work for an active-duty serviceperson who’s deployed overseas. An online lender that can be accessed from anywhere in the world is a better fit, particularly if the term for the debt consolidation loan will span several deployments.
Eligibility and accessibility should be weighted equally with interest rates, cost, loan terms, and customer service. Some lending surveys rank certain elements as more important than others. Ideally, you won’t have to compromise on any of these factors.
Why the Application Process Matters
Scam alert: Sadly, there are bad folks out there who seek to prey upon those seeking financial products, and veteran-centric products are no exception. Online forms promising low-interest rates and great loan terms may seem enticing, but they could be phishing sites looking to steal your identity. That can be avoided if you go only to websites run by banks and credit unions that you’re familiar with. Of course, that could also limit the number of loan offers you receive.
But there are other ways to protect yourself. Read the online reviews for the lender. Check with the Better Business Bureau for any negative reports or complaints. If you’re applying online, confirm that the URL for the loan application has the same root URL as the lender itself. Your browser should have an icon (typically a little padlock) in the URL box that confirms if the site is secure. Don’t submit any info on the form if it’s not. Don’t do business with offers that arrive, unsolicited, by phone or text message. And be aware that high-pressure tactics and short deadlines to apply can be hallmarks of a scam.
Let’s add one more caveat: Some online applications connect to multiple lenders. Sadly, many of them advertise that they have the best debt consolidation loans for veterans, but they’re simply shopping sites for lenders that cater to the general public. The “veteran” distinction in their advertising is there to draw you in. Make sure the lenders have something specific to offer you based on your service.
Qualifying Criteria for Debt Consolidation Loans
Each lender has their own criteria for approving a debt consolidation loan. Credit score and history are at the top of their list. Most lenders prefer to see a credit score of 680 or above, but some lenders will do business with you if your score is as low as 580. Anything under that is considered “poor credit” and will likely result in the rejection of your loan application.
If you’re on active duty, the lender can easily verify your income. The same is true if you’re collecting a military pension. Those numbers, along with any civilian income you have coming in, will be used to calculate your debt-to-income ratio. That is done by dividing your total monthly debt payments by your gross monthly income.
Your credit score and DTI will be used to set the terms and conditions of your debt consolidation loan. That’s one of the variables you can use to compare loans. Here are some other tips to help you find the best debt consolidation loan if you’re a veteran.
- Individuals with lower credit scores will likely need to pay a higher interest rate.
- Civilians will normally pay a high origination fee (these can vary from 1% to 5% or more of the loan amount) if they have a low credit score. Veterans may be able to get that waived.
- Drill down on closing costs. You may be able to avoid these charges as well, especially if you find a loan that is tailored for veterans.
- Prequalify with a soft credit check if you can.
- Check carefully for additional fees.
- Ask about the lender’s customer service process.
Read more debt consolidation company reviews.