Fortunately, bad credit doesn’t mean you’re out of luck in terms of military loans. There are options out there for servicemembers and military families with bad credit. The trick is finding the ones that don’t have such astronomically high interest rates that you end up hurting your credit more. These loans, created for servicemembers with poor scores, may be better options than payday loans at the least. The key is making good choices with these loans, although your first priority may be to restore credit before seeking out loans that may be damaging.
Knowing Your Borrowing Options
Bad credit can be caused by poor financial habits, a lack of financial history, or a poor understanding of how credit works. Some people don’t understand credit and how important it is until they try to qualify for a loan, and then realize their credit history is subpar due to something like too many late payments or closing credit accounts. Fortunately for both active duty and veteran military, military service can do good things for your credit as well as your money saving abilities. However, if you’re seeking a military loan before your credit has rebounded, you may have to look more carefully into your options because your ability to get a loan will be different than someone with good credit getting a loan.
- Getting a VA loan: If you’re looking for a home loan, you may qualify for a home loan through the VA Home Loan Program. Not only are military members able to get better mortgage rates, they are also afforded more opportunities for buying a home without perfect credit. As long as you don’t have outstanding collections or judgements, you may qualify for a VA loan for your home.
- Getting a military loan through another lender: You can also get military loans through other lenders. Having military status is great for lenders because you have a stable career with a somewhat predictable salary timeline.
- Alternative loan options: Other loan options for service members with bad credit include payday loans or personal loans from a friend or family members. While these are options for everyone in an emergency, these are the worst-case loan options that should be avoided.
Making Good Choices About Debt
Once you know that you still have options to get military loans with bad credit, you need to know how to make good choices with those options, because some are better than others.
- Interest rates: Many times, you’ll be hit with high interest rates on your loans because of your bad credit. Shop around and find the lowest interest rate you can so you aren’t in a situation where you’re only paying off your loan’s interest and not its principal.
- Upfront cost: One huge perk of a military home loan is that you won’t have to pay anything upfront for your home when usually, you’ll have a higher than normal down payment when trying to buy a house with bad credit. Shop around and be prepared for upfront costs with loans, even though they will be lower for a military loan.
- Military status: Be sure to leverage your military status — whether you/your spouse is active duty or a veteran — when shopping for a loan of any kind. This is one of the many reasons why you shouldn’t consider a payday loan or personal loan first, as they don’t always consider your military status and are very high risk. Military personnel are often offered better interest rates than the civilian public. They are also given more opportunities for loans despite bad credit, so be sure to seek out a loan designed especially for you, not a loan for just anyone.
- Types of loans: Whether you’re looking for a small business loan, a home loan, a car loan, you’re active in the military, or a veteran, there are specific loan options for you. What you’re looking for in terms of a small-business loan varies for what you’re looking for in a home loan, so decide on the type of loan you need in order to make the best loan choice for your situation.
Restoring Your Credit
Before considering the type of loan you can get with bad credit, consider first whether or not this is even the right time for a loan at all. By taking some steps towards credit restoration, you can save yourself a lot of money in the long run in terms of interest rates and high upfront costs. By doing things like utilizing a secured credit card, you can help build your credit and benefit from it by getting a loan later on with a lower interest rate. Keep your credit utilization low, always make your payments on time, and those habits will pay off on your credit report in no time.
Talk to your bank or credit union. They will be able to tell you your military loan options and how to handle them with your bad credit. Your best option may be to get a cosigner, get a VA home loan, utilize a military loan with an acceptable interest rate, or to wait for your credit to improve. Everyone’s situation is different, so be sure to do your homework so that you’re not getting yourself into a loan situation that may hurt your credit further.
Bad credit doesn’t automatically mean you can’t get a loan, especially a military loan for service members. Your military status means you’re able to have more access to loans despite bad credit, just be sure you know the loan options available, how to make good choices with those loans, and how to restore your credit. A military career isn’t an easy one for so many reasons, but thankfully there are so many programs dedicated to helping service members no matter what their financial history looks like. Take advantage of the opportunities you have and your credit will have the ability to go from bad to good in no time.
For more tips and guides, visit our military support resource center. For more information on credit scores, visit our credit score resource center. Need to contact the credit bureaus about an error on your credit report that’s bringing down you score? Visit our dispute letter template resource center.
Image Source: https://depositphotos.com/
Our Experts Recently Evaluated The Top 5 Credit Repair Companies Available.