Can I get a military loan with bad credit?

Female solider standing outside of her home and wondering if she can get a bad credit military loanImage: Female solider standing outside of her home and wondering if she can get a bad credit military loan

In a Nutshell

Put simply, a “bad credit military loan” can mean any type of loan that’s marketed to members of the armed forces who are struggling with rocky credit histories. If that sounds like you, a personal loan of this kind may seem like a blessing. But be careful: Interest and costs can be high — and there may be other options to consider.
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Financial stress seems to go hand-in-hand with military service in the U.S. In fact, 62% of military families say money issues are their biggest lifestyle stressor, according to the 2018 Military Family Lifestyle survey by Blue Star Families.

Members of the military and their families can face unique situations that make them vulnerable to financial problems. For example, deployments and relocations can put financial strain on a military family, especially if a non-military spouse isn’t able to find work. Childcare also may be an issue.

If you’re in the armed forces and are having a hard time with bills, debt and imperfect credit, you may have seen offers for bad credit military loans and wondered about getting one. You may be able to qualify, but you should be aware of some risks that can come with getting this type of loan, which is an unsecured personal loan marketed for military members with bad credit. And, it’s worth looking at other options before you commit to any kind of “bad credit” loan.

Let’s look at some things to know about bad credit military loans and possible alternatives.

What is a bad credit military loan?

A bad credit military loan isn’t a specific type of loan like a mortgage or an auto loan. Instead, it is an unsecured personal loan that’s marketed toward military members who have bad credit. Some lenders specifically market personal loans for people in the military, promising to consider your loan application regardless of your credit history.

Each lender may have its own definition of “bad credit.” FICO, one of the major credit-scoring models, defines poor credit as scores of 579 and lower. With that kind of credit profile, it can be difficult to get approved for a loan or, if you are approved, a loan with a favorable interest rate because lenders may view you as a risky borrower.

While dinged-up credit might not prevent you from getting a military loan, it’s likely you’ll pay more for the loan than you would if you had stronger credit. Such loans often have high interest rates or may come with fees.

Where can I get a bad credit military loan?

A variety of lenders market loans to members of the military. If you have poor credit, you’re more likely to face higher interest rates if you want to borrow money. But some lenders may offer better rates and terms than others depending on your situation, so compare estimates from a number of lenders before you decide which to apply for.

Options for a bad credit military loan might include …

  • Online lenders: Various online lenders market their products specifically for members of the military, both active-duty and retired. And some of them advertise that bad credit doesn’t mean you’ll automatically be denied a loan. But these loans often come with a high APR.
  • Banks: Some community banks also offer loans for active-duty military with little or no established credit.
  • Credit unions: Several credit unions offer membership for members of the military. Some are branch-specific, others are for veterans or active-duty military members, while still others are for anyone currently or formerly serving in any branch of the armed forces.

What is the Military Lending Act?

Unfortunately, some lenders might try to take advantage of service members’ financial vulnerability. The Military Lending Act, passed in 2006, aims to protect active military members (including those on active National Guard or National Guard reserve duty) and their families from predatory lending practices. Among other things, the Military Lending Act …

  • Limits the amount a creditor can charge active-duty service members, their spouses and eligible dependents for certain types of unsecured loans. The total annual percentage rate can’t exceed a specified limit — with some exceptions — of 36%. This is called the Military Annual Percentage Rate. Just keep in mind that this Military Annual Percentage Rate includes finance charges, credit insurance premiums or fees, add-on products and other fees like participation or application fees.
  • Requires lenders to provide loan term disclosures beyond what’s required by the federal Truth in Lending Act.
  • Prohibits certain loan terms that may be unfavorable to the consumer.

What are alternatives to a bad credit military loan?

You may have other options than potentially high-interest military loans for bad credit.

Other personal loans

Military loans for bad credit are just personal loans marketed for military members who have bad credit. But you can find a variety of types of personal loan lenders. Banks, credit unions, consumer finance companies, online lenders and peer-to-peer lenders also offer personal loans.

The funds from a personal loan can be used for a number of different purposes. Loan amounts, rates and terms vary. But if you can offer some type of collateral to secure the loan, you may be able to get a lower interest rate. Just be sure you understand all of the terms, APR and any fees associated with the loan before applying.

Payday alternative loans

When you need cash fast, you may consider a payday loan — a very short-term, high-interest loan that’s typically required to be paid back by your next payday. But a payday alternative loan may be a better option.

Some federal credit unions offer these loans, and federal regulations cap the interest on payday alternative loans at 28% (although interest rates may change). The fee for the cost of processing the application can’t exceed $20, the loans must be repaid in one to six months, and loan amounts must be within $200 to $1,000.

Credit cards

Taking on more credit card debt might be the last thing you want to do, but in some situations a credit card might be a better option than a high-interest military loan for bad credit. Options for using a credit card can include a cash advance or an intro 0% APR credit card. But be cautious in pursuing either option.

Cash advances on a credit card typically come with fees and a higher APR than your card charges for purchases. Interest often starts accruing as soon as you take the advance, so it’s important to repay the money as quickly as possible.

If you qualify for one, a 0% intro APR card can allow you to finance an expense interest-free for a period of time. Be sure to make your payments on time and pay off the balance before the promotional period ends, or you’ll be hit with interest charges on the unpaid balance. And it may be difficult to qualify for this type of credit card if you don’t have solid credit.

Credit Karma Guide to 0% APR on Credit Cards

Nonprofit programs

If you’re a veteran and need financial assistance, you may be able to qualify for help from a nonprofit program. For example, Coalition to Salute America’s Heroes works to provide financial assistance to veterans for things like rent, food and day-to-day items.

Additionally, the Veterans of Foreign Wars Unmet Needs program can grant up to $1,500 in financial assistance. You’ll want to take advantage of any grants or assistance programs that you may be eligible for as a veteran before taking out a high-cost loan.

Bottom line 

If you’re a military member with a tough credit history, you’re not without options if you need a loan. Various funding choices may be available, but it’s important to apply the one that best fits your needs. Check out all grants and assistance programs that might be available first, and if you’re still considering a loan after that, then explore what options could be available.

And if you’re able to improve your credit before seeking a loan, you may boost your chances of getting approved for a loan at more favorable rates and terms. Making consistent on-time payments and keeping balances low on your credit cards can help improve your credit over time.

About the author: Melanie Lockert is a freelance writer and editor currently living in Portland, Oregon. She is passionate about education, financial literacy and empowering people to take control of their finances. Her work has been f… Read more.