Table of Contents
- What Are Military Relief Programs?
- What Are Personal Loans?
- Key Differences Between Personal Loans and Military Relief Programs
- When a Personal Loan May Make Sense
- When Military Assistance Programs May Be a Better Option
- How to Choose the Right Option for Your Situation
- How SoFi Personal Loans May Help
- FAQ
Military members and their families often face unique financial challenges that can take a toll on their budget. Sometimes they may need just a little boost to get them through a rough patch. Or they might require a more significant, longer-term solution to get their finances back on track.
In this guide, we’ll compare two popular options military members can use to get back on track financially: borrowing money with personal loans vs. military assistance through a military relief program. We’ll break down the basics of how they both work and take a look at why one might be a better fit than the other depending on your financial situation.
Key Points
• Private lenders offer personal loans for various uses, repaid with interest over time.
• Military relief programs provide loans (some interest free) or grants for specific, temporary needs.
• Personal loan eligibility depends on creditworthiness, while relief programs focus on military members’ current financial need.
• Personal loans may better suit larger expenses.
• Relief programs are typically for urgent, short-term costs.
What Are Military Relief Programs?
Military financial assistance options are set up to assist service members who need temporary help with their finances.
If you’re struggling financially, the military support program for your service branch may be able to help with an interest-free loan, a grant, or a combination of both types of financing. These organizations include the Air & Space Forces Aid Society, the Army Emergency Relief, Coast Guard Mutual Assistance, and the Navy-Marine Corps Relief Society.
Soldiers, retired soldiers, and military families can get information and apply for assistance from anywhere in the world by accessing the appropriate organization’s website. Or you may be able to go to your immediate commander to apply for emergency help. Free financial preparedness counseling is also available through these organizations.
Other military relief resources include the VFW Unmet Needs Program for active-duty service members, which provides grants to help cover the cost of daily necessities, and the American Legion Temporary Financial Assistance program, which offers grants to active service members and the eligible minor children of American Legion members. There are also relief programs specifically designed to assist disabled veterans.
What Are Personal Loans?
Personal loans are loans provided to eligible borrowers by private lenders. The terms of the loan may vary depending on the lender, but the same basics usually apply.
When you qualify for a personal loan, you’ll receive the funds you need in one lump-sum payment, and you’ll be expected to repay that amount in fixed monthly installments over an agreed upon loan term, typically ranging from two to seven years. Most personal loans for military and nonmilitary applicants alike are unsecured, which means they don’t require any collateral. And if you’re approved, you can use the money for just about anything you like.
Qualifying military members can get a personal loan from any lender, as long as the lender follows the rules of the Military Lending Act (MLA). This federal law puts limits on certain costs (such as interest rates, fees, and penalties) to protect military borrowers.
Recommended: Exploring the Pros and Cons of Personal Loans
Key Differences Between Personal Loans and Military Relief Programs
The main difference between personal loans and military relief programs comes down to who is providing the funding.
Personal loans come from private lenders, and they are repaid at a fixed (as opposed to variable) interest rate, so payments are the same each month. You can apply for the amount you need or want, and some lenders may offer loans up to $50,000 or even $100,000 to eligible borrowers. Online lenders, banks, and credit unions offer personal loans. The Department of Veteran Affairs (VA) does not.
Military relief programs offer several different types of assistance, including loans and grants that are usually intended to help with one-time financial needs, such as rent and utility payments, or expensive vehicle repairs.
Some other key differences include:
Eligibility Requirements
Most personal loans are unsecured, so borrowers typically qualify for their loan and loan terms based on their overall creditworthiness. Lenders may have different eligibility criteria, but they generally evaluate a borrower’s potential risk by looking at their credit scores and credit history; the stability of their income sources; and their debt-to-income ratio (DTI), which is the total of all monthly debt payments (credit cards, student loans, car payments, etc.) divided by gross monthly income.
Requirements for military relief programs can also vary, but the funding type and amount a borrower receives is typically based on current financial needs. When applying, borrowers should be prepared to provide their military ID, a budget, and other documentation directly related to their request for financial assistance.
Speed of Funding
Whether you’re a veteran or an active-duty military member who needs financial help in a hurry, there’s no need to panic. Both personal loan lenders and military relief organizations have processes in place to provide fast funding to those with emergency needs.
Lenders with an online application process tend to offer the fastest personal loan funding, and some offer same-day or next-day funding. (Even if you need an emergency loan, try to do some research to ensure you’re working with a legitimate lender who isn’t taking advantage of your circumstances. You’ll likely find there are several good alternatives to payday loans, which can have tight repayment schedules and very high fees.)
Many military relief programs are also able to provide financial assistance options for unexpected or urgent situations. As noted above, you may be able to go to your immediate commander to ask for support, or you can apply in person at the nearest office of your branch’s relief organization.
If the relief organization doesn’t have a nearby location, one of the other service relief organizations or the Red Cross may be able to help process your in-person request. Or you can apply online.
One way you can improve the chances of getting funding faster, regardless of the source, is to make sure your application is complete and accurate, you’ve submitted all required documentation, and you’ve met any deadlines.
Repayment Terms
If you qualify for a one-time grant through military financial assistance options, you won’t have to worry about paying back the money. But loans are a different matter.
With a personal loan, you can work with your lender to establish your repayment terms — including whether there are potential penalty fees (if you pay late, for example, or want to pay off the loan early) and how long you’ll have to repay the money (such as two, five, or seven years). Keep in mind that along with your personal loan rate, which is usually fixed, the length of your term will impact your monthly payment and how much you’ll pay in interest over the life of the loan. 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.
The terms for a military relief program loan may vary based on the type of financing you receive and the organization that provides it, but these zero-interest loans are generally repaid in equal installments within a year to two years. Borrowers should be prepared to complete their repayment within their current enlistment period, and they may be required to set up automatic payments from a bank account.
Flexibility of Use
Here’s where personal loans vs. military assistance programs can really differ.
If you qualify for a personal loan, you can use the money you receive for just about anything you like — whether it’s an emergency expense, a home or car repair, moving or education costs, or consolidating credit card debt.
When you apply for help from a military relief program, you should expect to document your specific needs and how you plan to use the money. Though each application is considered on an individual basis, you may be turned down if you need help with something your organization doesn’t cover.
When a Personal Loan May Make Sense
If you need help to regain control of your finances or to manage a larger expense, a personal loan may be a better long-term strategy. You may be able to borrow more money than you can get from a military relief program; funding is usually fast and convenient; you can use the money for anything you want (all at once or over time); and you may be able to repay the loan over a longer period.
Another long-term benefit of personal loans for military: If you make your payments on time, a personal loan may have a favorable effect on your credit.
Recommended: The Difference Between Personal Loan and Credit Card Debt
When Military Assistance Programs May Be a Better Option
Military assistance programs may be a better option if you need temporary help paying a utility bill or making your rent, or if an unexpected medical or repair bill throws your budget out of whack. If you can qualify for a grant or a zero-interest loan that covers the entire amount you need to get back on track, your borrowing costs will be lower. But unlike personal loans from private lenders, there can be limits on what you can use these programs for and how much you can borrow.
How to Choose the Right Option for Your Situation
If you find yourself trying to decide between a personal loan and an assistance program, it may be helpful to consider both your current needs and your long-term goals. If a small grant or loan will only get you out of trouble temporarily, but you know it won’t help you get where you want to be for the long haul, you may want to check out what a personal loan can do.
It’s also important, though, to consider the overall cost to you. Can you qualify for a personal loan with a competitive interest rate and other favorable loan terms? Is there a chance a personal loan would only add to your debt? Are you sure you can handle the monthly payments? Even though a personal loan isn’t secured with collateral, defaulting could damage your credit record.
You can use a personal loan calculator to estimate how much your monthly payment might be and the total amount of interest you can expect to pay over the loan period. Either type of financing is likely a preferable alternative to payday loans.
How SoFi Personal Loans May Help
At SoFi, we know that military members’ families can sometimes face special, even urgent, financial challenges. A personal loan can offer fast funding, flexible repayment terms, and competitive interest rates. With a SoFi personal loan, qualified borrowers can obtain from $5,000 to $100,000. No-fee loan options are available.
The Takeaway
When times get tough, military assistance programs can offer much-needed temporary financial support for service members and their families. Personal loans also can provide a quick solution for short-term problems — but they can be a useful long-term solution, as well.
Military families can use a personal loan for just about any purpose, whether it’s covering an unexpected bill, helping with moving expenses, dealing with high-interest debt, or filling a temporary income gap when a non-military spouse must leave their job to relocate.
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
What are military relief programs?
Military support programs can help current service members who are struggling financially with interest-free loans, grants, or a combination of both types of financing. Service branch-specific organizations include the Air & Space Forces Aid Society, the Army Emergency Relief, Coast Guard Mutual Assistance, and the Navy-Marine Corps Relief Society. The VFW, American Legion, and other organizations also offer temporary assistance to active-duty military and veterans.
Are personal loans better than military assistance programs?
Choosing to apply for a personal loan vs. a military assistance program may boil down to how much help you need and how you plan to use the funds. While relief programs offer grants and zero-interest loans, the funding they provide is limited.
Can military members use both options?
Yes, military members can apply for both options, and they may qualify for both.
How fast can you get funds from a personal loan?
Some online lenders offer same-day or next-day funding for personal loans.
What should you consider before choosing a loan?
When choosing a personal loan, compare interest rates and other loan terms, lender fees, funding time, military and other potential discounts, as well as the lender’s reputation for customer service and reliability. Consider your individual needs and goals when deciding which lender and loan is the best fit overall.
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