4 Types of Military Loans

Military loans will vary from lender to lender but can be grouped into four basic types. The benefits of military loans are that lenders designed these loans specifically to meet the needs of the military lifestyles. Whether the lenders focus solely on military loans, or are a division of a diversified financial services company, the products are offered with the military borrower in mind; from frequent moves to the complex military pay and benefits.

Traditional Loans

Military loans often focus on emergency, or bad credit lending. However, a significantly large segments of the military loan target traditional installment and mortgage loans.

While tailored to the military lifestyle, if a member of the armed services has good credit, he or she can qualify for standard installment loans. These loans typically range form $1,000 to $10,000 with a maximum term of 36 months. Depending on your credit score, they feature competitive interest rates and can be used for almost any purpose. Debt consolidation is a common loan for military borrowers.

For military members wanting to purchase a home while expecting to be stationed several years in one post, or who want to buy a permanent home for their family, military lenders offer standard fixed-rate mortgages and adjustable rate mortgages. The mortgage terms are provided with minimum down payment and low rates.

Emergency Loans

Because military families live across the country, military lenders have created a package of military loans tailored to meeting emergency needs. These include:

  • Bereavement Loans - Even though there are benefits for the survivors of a deceased military member, often there are short-term cash needs that exceed government benefits, and come before insurance settlements. Bereavement loans are typically for $1,000. The loans offer low or no interest for three months and a reasonable rate after that.
  • Disaster Relief Loans - For service members or their families in a state or federal disaster area, many military lenders offer disaster relief loans. The loans are similar to a line of credit, often making up to $1,000 available for three months with no interest.
  • Convalescent Loans - Military convalescent loans typically provide up to $1,000 interest free for six months with competitive, but above market, interest after that to service members who were injured in the line of duty. Often, availability of these loans is limited to those injured in designated combat zones.

Bad Credit Loans

One segment of the military lending industry targets military members who may have missed payments or otherwise hurt their credit scores. These loans will carry a higher rate of interest and will have restrictive payment terms. The goal is get money loaned and help service members repair their credit.

Short-Term Loans

As an alternative to payday lenders, who often charge very high interest rates, military lenders have their own short-term loans. The loans typically offer higher rates and function in much the same fashion as a payday advance loan. These loans are usually allowed a maximum interest rate of 24 percent per year. If a borrower does not pay off the loan, the debt rolls over from month to month, compounding the difficulty of getting the loan paid off.

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