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Whether you’re a veteran or active-duty service member who’s in a pinch because of a recent expense, or you’re considering a credit card consolidation loan to get a handle on high-interest debt, a personal loan can help provide the funding military families need to stay on track financially.
And did you know there are borrowing protections that may apply specifically to some military members and their eligible dependents?
Before you start shopping for the best lender and loan to fit your financial needs, read on for a look at how personal loans for veterans and military members could work for your family.
Key Points
• Personal loans provide military families with flexible, lump-sum funds for emergencies or consolidating high-interest debt.
• Loans feature predictable monthly payments with a fixed interest rate, and are typically unsecured (no collateral needed).
• Common uses include covering emergency medical/car bills, managing moving costs, and bridging temporary income gaps.
• Lenders assess eligibility based on key factors: credit score, reliable income, and Debt-to-Income (DTI) ratio.
• Active-duty members and veterans may qualify for special discounts or loan protections.
What Are Personal Loans for Military Families?
Personal loans are loans that military families can use for just about any purpose. The loan terms may vary depending on the lender — and some lenders may work only with military members, not the general public. But the same personal loan basics usually apply:
• Lump-sum upfront funding: Once you qualify for a personal loan, you’ll receive the money in one lump-sum payment, and you’ll repay that amount in monthly installments.
• Predictable payments: Personal loans usually come with a fixed interest rate, so your payments will stay the same for the life of the loan.
• Usually unsecured: Most personal loans don’t require any collateral. Borrowers typically qualify for their loan and loan terms based on their creditworthiness.
Common Reasons Military Families Use Personal Loans
Military personal loans can provide military members and their families with fast, flexible funding when they need it most. Here are some practical ways a military family might use a personal loan:
Covering Emergency Expenses
Even the most budget-minded families can run into unexpected expenses from time to time. A personal loan can help with emergency medical bills, expensive car repairs, and unexpected home repairs, for example.
Managing PCS Moving Costs
Even with government reimbursements and allowances, military families may need a financial boost to keep up with the upfront expenses (packing supplies, utility deposits, etc.) related to a Permanent Change of Station. A personal loan also can help bridge the income gap when a military spouse must seek new employment because of a move. The interest rate on a personal loan is typically lower than it is for a credit card — especially if you have a good credit score — which can make it a more cost-effective option.
Consolidating High-Interest Debt
By combining multiple debts into a single loan payment with a credit card consolidation loan, families can streamline their bill-paying process and potentially save money with more favorable repayment terms.
How Personal Loans Work
A personal loan allows an eligible borrower to receive a fixed amount of money from a lender and repay it over a specified period of time. You can apply for a personal loan with an online lender or a traditional bank or credit union. And though approval times vary, you can expect to receive the money fairly quickly. (Lenders with an online application process typically have the fastest turnaround times if you’re looking for an emergency loan.)
The amount you can borrow may also vary, depending on the lender and your own creditworthiness. Some lenders may offer loans up to $100,000, but $50,000 is a more typical maximum amount — and you can borrow much less.
Loan term lengths usually range from two to seven years, but there are lenders who offer shorter and longer terms. Your loan term can have an impact on your monthly payment and how much you’ll pay in interest. For example, a shorter-term loan may have a higher monthly payment but cost less in total interest, while a longer-term loan might have lower monthly payments but higher interest costs.
Besides the interest rate you’re offered, it can be a good idea to compare the fees lenders are charging and any discounts that might apply to you on military personal loans, as well as customer support options and other perks. As a veteran or current military member, you also may be eligible for certain discounts or loan protections, including a cap on the maximum interest rate you’ll have to pay.
Eligibility and Factors Lenders Consider
Personal loan lenders don’t all use the exact same eligibility criteria for loan approvals, but they generally will look at these factors:
• Credit score: Lenders usually review an applicant’s credit score and credit history to help evaluate a borrower’s potential risk. Minimum requirements can vary, but if your record shows that you’re good at managing debt, you may qualify for a better interest rate.
• Income: Lenders will also want to know that you have a reliable income, so you should be prepared to provide pay stubs and other documentation.
• Debt-to-Income (DTI) ratio: Your DTI ratio can help lenders decide if you’ll be able to afford your monthly loan payment on top of all your other monthly debt obligations. You can calculate your DTI ratio by dividing the total of all your monthly debt payments (credit cards, student loans, car payments, etc.) by your gross monthly income.
Together, these factors can influence whether your application is approved, how much you can borrow, and other loan terms.
Recommended: How to Apply for a Personal Loan
Alternatives to Personal Loans for Military Families
While you’re researching the pros and cons of personal loans to determine if this type of financing is right for you, you may also want to look at some alternatives:
• Retirement plan loan: If you and/or your spouse participate in a workplace retirement plan — such as a 401(k) or a Thrift Savings Plan (TSP) for service members and federal employees — you may be able to borrow money from your account and repay it over time (with interest) through payroll deductions. This type of loan won’t affect your credit, and it can be easy to apply. But before taking a retirement plan loan, it’s important to consider the impact it could have on your retirement savings and your future goals. Though you’ll be paying back the loan and any interest to yourself, you’ll be missing out on the compound earnings your investment savings might otherwise have accrued while in your account.
• Home equity loan: If you own your home and aren’t planning to relocate any time soon, you may want to look into using your equity to secure a home equity loan, a home equity line of credit (HELOC), or to do a cash-out refinance. You can use a home equity loan calculator to help determine how much equity you have in your home (lenders typically require that you have at least 20%), how much you might be able to borrow, and an estimated monthly payment amount. If you decide to go this route, it’s a good idea to also check out how long the lending process will take and what your closing costs might be.
• Free assistance: Depending on your circumstances and how much you need, you may want to see what types of free assistance are available to you. Several organizations offer grants, loans, and free financial counseling to veterans and military families.
How SoFi Personal Loans May Help
At SoFi, we know that military families can sometimes face special financial challenges, and we can help with fast funding for personal loans, flexible repayment terms, competitive interest rates, and one-on-one assistance. Emergency loans for military members can provide the peace of mind you need.
With a SoFi personal loan, you can borrow from $5,000 to $100,000. And no-fee loan options available.
Recommended: SoFi Personal Loan Calculator
The Takeaway
Personal loans are loans that military families can use for just about any purpose, whether it’s covering an unexpected expense, helping with moving expenses, filling a temporary income gap when non-military spouses have to leave their employment, or dealing with high-interest debt.
And unlike some other types of financing, personal loans typically come with a fixed interest rate, so borrowers can always know what their monthly payment will be and budget accordingly.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
FAQ
Can military members get personal loans?
Personal loans for veterans and loans for active-duty military service members are available through online lenders, banks, and credit unions.
Are there special loan options for active duty service members?
There are some financial institutions that offer special military discounts to qualified borrowers, or they may provide personal loans for veterans and current military members only. But in most cases, these loans are basically the same as personal loans available to the general public through online lenders and traditional banks and credit unions.
Can a personal loan be used for PCS expenses?
You can use a personal loan for just about any purpose, including for moving costs.
Do military members get lower interest rates on loans?
Generally, personal loan interest rates are determined by a borrower’s creditworthiness. But those seeking loans for active-duty military may also be eligible for certain service-related protections through the Military Lending Act (MLA) or the Service members’ Civil Relief Act (SCRA).
What are alternatives to personal loans for military families?
Depending on their timeline and their personal needs and goals, military families may also want to compare the pros and cons of using credit cards, a home equity loan or home equity line of credit (HELOC), or a retirement plan loan.
photocredit: iStock/DrazenZigic
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