Your Complete Guide to Loans for Military Families

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Serving our country with the U.S. Armed Forces requires many sacrifices. It can be tough on service members, veterans, their families — and their household finances.

Fortunately, military service members and veterans who need a loan have several borrowing options open to them. Even better, many loans for military families provide important benefits and protections.

This guide will walk you through four main types of loans, so you can understand the options and benefits available to you:

  • Federal and private student loans

  • VA-guaranteed loans and other mortgage options

  • Auto loans for military members

  • Military personal loans

Student loans for military families

Military families can pay for college with the help of several forms of financial aid offered to dependents of service members, including children, stepchildren, and spouses. Some programs also offer student aid and scholarships to help veterans complete their own educations.

Even with this help, however, some college students might need to borrow for their education. There are two main types of student loans for military families, just as for civilians: federal and private.

Federal student loans

Federal student loans are offered to most college students, including those serving in the military and those with family members who’ve served.

Students don’t have to meet credit requirements to take out federal student loans. You only have to meet eligibility requirements for federal aid, such as submitting the Free Application for Federal Student Aid and making sufficient progress toward a college degree.

This chart shows some of the requirements and rates on federal student loans:

Federal Student LoanWho can use it?Credit requirementsInterest rate (2018-2019)One-time loan feeAnnual loan limit
Direct SubsidizedUndergraduate students with a demonstrated financial needNone5.05%1.066%Up to $5,500 per school year
Direct UnsubsidizedUndergraduate studentsNone5.05%1.066%Up to $7,500 per school year for dependent students; up to $12,500 per school year for independent students
Direct Unsubsidized (for graduate students)Students working toward a graduate or professional degreeNone6.60%1.066%Up to $20,500 per school year
Direct PLUSGraduate students and parents of undergraduate studentsNonadverse credit7.60%4.264%Cost of attendance minus other financial aid received

There are several benefits offered on federal student loans for military families. You can defer payments during active duty, for example. You might even get help paying off your debt through federal programs that provide military student loan forgiveness and repayment assistance.

Private student loans

Because federal student loans come with unique advantages, such as repayment plans based on your income and no credit requirements, they should probably be your first choice for student loans. But private student loans can offer additional financing when needed.

Before turning to private student loans, however, military families should understand how they differ from federal loans. This private debt doesn’t qualify for forgiveness or repayment assistance through federal programs, for example. You’ll also need to take additional steps to get private student loans:

  • Compare student loan rates: While all borrowers get the same rates on federal student loans, private student loan rates vary from lender to lender. Take time to shop around and compare private student loans to find the best deal.

  • Prepare to qualify: Private lenders have strict requirements for credit, income, and employment. The majority of college students won’t qualify for a private student loan on their own and will need to apply with a cosigner.

  • Pay attention to repayment terms: Check to see if your private student loans offer deferment for enrolled students or active-duty military members.

One benefit offered on both federal and private student loans is granted through the Servicemembers Civil Relief Act. When you’re on active duty, this act requires all lenders to drop rates to 6.00% on student loans you took out before joining the military.

VA home loans

When it comes to buying a home, one of the most popular options for military families is the VA-guaranteed loan. In fact, over 740,000 VA loans were funded in 2017 alone, with the average balance at $254,870, according to the Department of Veterans Affairs.

“VA home loans can be a great way to buy a home,” said Gerri Walsh, senior vice president of investor education at the Financial Industry Regulatory Authority (FINRA). While these loans are offered by private lenders, “the VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.”

You could get the following benefits:

  • No down payment is required with a VA loan. Compare that to the 3% minimum down payment required on FHA or conventional mortgages, or the median 6% down payment reported by the National Association of Realtors for first-time homebuyers.
  • VA loans don’t need mortgage insurance. Most lenders require mortgage insurance on a loan balance at 80% or more of the home’s value, a cost that’s packaged into or added onto the mortgage. VA-backed loans are effectively insured by the federal government, removing any need for mortgage insurance.
  • There are no VA loan credit requirements. It can be difficult to buy a home with bad credit since many lenders won’t approve you for a mortgage. VA loans, however, don’t consider credit scores. Instead, the lender reviews your entire loan profile before deciding on whether to lend to you.

These benefits help hundreds of thousands of veterans access affordable mortgages regardless of their credit or other underwriting factors.

Other home loan options for veterans and military members

Veterans shouldn’t default to a VA loan, however. “VA loan rates are often not the lowest available,” Walsh pointed out. A funding fee of up to 3.3% also adds to the costs of VA home loans.

That means a conventional mortgage might actually offer a better deal for homebuyers with great credit. Find the best deal by collecting and comparing rate quotes for multiple types of mortgages, including VA loans.

Additionally, the costs and structure of a VA loan can tempt a veteran into buying more house than they can afford.

“If the housing market declines, a service member with little or no equity in the home can quickly find themselves underwater on the loan,” Walsh warned.

Auto loans for military members and veterans

Unlike with home and student loans, you won’t find federal programs that help you pay for a car or that offer auto loans to military families. But many car manufacturers offer discounts to service members buying cars. You could even get a military discount on your auto loan.

Since auto loans are guaranteed by the value of your car, they present less risk to lenders. You’ll likely qualify more easily and secure lower rates on a car loan than you’d get on unsecured debt.

To make sure you’re getting the best deal on your auto loan and your car, Walsh recommended separating these two purchases. “Auto loans can be a big profit center for new and used car dealers,” she pointed out. “Bringing your own financing to the table before making a purchase can be a good strategy.”

First, collect auto loan rate quotes from multiple lenders. Try to request all of these offers within two weeks of each other. Many auto lenders will use a hard credit check to generate your quote, and keeping these inquiries grouped together will limit their negative effect on your score.

Here are a few types of auto financiers military families can consider:

  • Military banking institutions such as USAA, Navy Federal Credit Union, or PenFed Credit Union

  • Local credit unions

  • Your current bank

Military personal loans

Personal loans can be used to finance almost anything, from relocation expenses to credit card consolidation. As with auto loans, there are no federal programs that offer personal loans for military families. But many lenders provide personal loans that can meet the needs of a veteran or active-duty service member.

Of the types of military loans listed here, unsecured personal loans generally have the highest lending standards. To secure a personal loan, you’ll need a credit score of at least 580. Lenders reserve more affordable rates and terms for borrowers with scores of 700 or higher.

Even if you can qualify for a personal loan, Walsh cautioned against borrowing more than you need — and can afford to repay. Use our personal loan calculator to project repayment terms. Make sure your payments will be affordable. You should also shop around to find the best personal loans for veterans or service members.

Stay away from military payday loans

“Finally, avoid alternative products, such as payday loans, auto title loans, own shops, tax advance loans, and rent-to-own stores,” Walsh advised. “These kinds of loans can trap unwary borrowers into long-term contracts with very high interest rates.”

If you do need cash fast, consider less-expensive alternatives to payday loans such as ARK from the PenFed Foundation, which offers funds up to $500 for a $5 fee.

5 steps veterans and service members should take before borrowing

The financial realities for veterans and active-duty military personnel aren’t always easy to navigate. Military families need to be careful when deciding whether to take on the burden of debt.

“Borrowing always involves costs that extend well beyond the interest you inevitably pay, and these range from out-of-pocket fees to the opportunity costs of loans,” Walsh said.

Military members and veterans who stay informed about the cost of borrowing will be able to take on and manage their debt with wisdom. Here are some steps veterans, service members, and their spouses can take to ensure they secure the best loans available to them.

1. Take advantage of military-provided financial counseling

The counselors hired to advise military members on their finances are professionals with years of experience and knowledge. They work with you to examine your financial situation, from reviewing your pay designation to helping you set a budget, Walsh said.

These counselors are also familiar with the financial challenges you may face and your available options as a military member. With this knowledge on hand, they can work with you to identify the most beneficial way to borrow what you need.

Best of all, this financial advice is free to military families. It’s part of the benefits provided to help military members focus more on their mission and worry less about their money.

2. Read up on laws about military loans

You can also find out more about the laws that protect veterans and military members from unfair lending practices.

Take, for example, the Military Lending Act. It makes it illegal for lenders to charge rates above 36.00% APR on most loans. Lenders also can’t make you pay prepayment penalties, pay through mandatory allotments, or waive your protections under consumer protection laws, according to the Consumer Financial Protection Bureau (CFPB).

The Servicemembers Civil Relief Act (SCRA) provides additional debt relief. “The primary purpose of the SCRA is to ease legal and financial burdens on military personnel and their families brought on by the demands of active duty,” Walsh said.

While you’re actively serving in the military, lenders are required to limit rates to 6.00% on debt you previously took out, according to the CFPB. It also protects you from loan foreclosures or repossessions while you’re on active duty.

3. Build up your credit

One of the best ways to make sure you can get approved for affordable loans is to improve your credit. By doing so, you’ll have access to more lenders and loans, and you’ll pay less for financing.

“Service members should find out their credit score and learn what goes into determining what factors are considered in their score,” Walsh said. Military families can get free credit scores and reports through their military installation’s personal finance counselors or through FINRA’s free credit score and analysis tool for military members.

4. Consider military-affiliated institutions

Most service members have heard of military-focused banks such as USAA, PenFed Credit Union, and Navy Federal Credit Union.

“Military-affiliated banks and credit unions have provided great service to military personnel and their families for decades,” and they understand the demands of military life in a way that other lenders might not, Walsh said.

Some even have products and services specific to military members. USAA, for instance, lowers interest rates for active-duty service members even further than required under SCRA rules, putting them at 4.00%.

5. Always shop around for loans

While military loans and banks can be a great place to start your search for credit, take time to look elsewhere, too. “Even military-affiliated banks and credit unions are subject to market conditions — the military-affiliated bank or credit union might not have the best rates for you,” Walsh pointed out.

“Always shop around for financial products. And for any type of loan, be sure to compare interest rates and terms, including penalty provisions,” she added.

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How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

RATES (APR)loan amount
5.99% – 19.16%1 $5,000 to $100,000
7.86% – 35.99% $1,000 to $50,000
5.94% – 35.97%* $1,000 to $50,000
99.00% – 199.00%2 $500 to $4,000
5.99% – 24.99%3 $5,000 to $40,000
7.99% – 29.99%4 $7,500 to $40,000
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NMLS #1136: Terms & Conditions Apply
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 18.82% APR (with AutoPay). SoFi rate ranges are current as of March 19, 2020 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your creditworthiness, years of professional experience, income and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
2 Includes AutoPay discount. Important Disclosures for Opploans.

Opploans Disclosures

Direct Deposit required for payroll.

Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
  2. NV Residents: The use of high-interest loans services should be used for short-term financial needs only and not as a long-term financial solution. Customers with credit difficulties should seek credit counseling before entering into any loan transaction.

  3. OppLoans performs no credit checks through the three major credit bureaus Experian, Equifax, or TransUnion. Applicants’ credit scores are provided by Clarity Services, Inc., a credit reporting agency.

  4. Based on customer service ratings on Google and Facebook. Testimonials reflect the individual’s opinion and may not be illustrative of all individual experiences with OppLoans. Check loan reviews.

  5.  

    Rates and terms vary by state.

3 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.
4 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. The loan terms presented are not guaranteed and APRs presented are estimates only. To obtain a loan you must submit additional information and documentation and all loans are subject to credit review and our approval process. The range of APRs is 7.99% to 29.99% and your actual APR will depend upon factors including your credit score, usage and history, the requested loan amount, the stated loan purpose, and the term of the requested loan. To qualify for a 7.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available. All loans are made by Cross River Bank and MetaBank®, N.A., Members FDIC.
* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

Personal loans made through Upgrade feature APRs of 5.94%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Accept your loan offer and your funds will be sent to your bank or designated account within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes the transaction. From the time of approval, funds should be available within four (4) business days. Funds sent directly to pay off your creditors may take up to 2 weeks to clear, depending on the creditor. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.