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Personal Loans for Military and Veterans with Bad Credit

Financial problems don’t pick victims. It can happen to just about anyone — even to the bravest men and women who protect the country. But when such situations arise, the usual option is to take out a personal loan. However, a lack of proper knowledge about this credit type could spell trouble for the borrower. So, in this article, we provide some very critical information about personal loans to help you decide if it’s the right solution for you.

  • Rates
  • Terms
  • Max amount
Air Force Aid Society
  • 0%
  • 3 to 12 months
  • $1,000
Omni Financial
  • 35.95%
  • 6 to 36 months
  • $10,000
  • 1.5%
  • Up to 60 months
  • $5,000
  • APR range
  • Fees
  • Terms
  • Amounth
  • Unemployment protection
Bank 1
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 2
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 3
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No

Table of Contents

Can Active Military Get a Loan With a Bad Credit Score?

The quick answer is yes, you can. Regardless of whether you’re currently serving, retired, a reservist, or even a military spouse, you can avail of a military loan. And this is because this specific loan type, in the first place, is primarily marketed to active duty and career retired service members with low credit scores. However, there is usually a service requirement that you must meet before you qualify for this loan type. If you’re currently on active duty, you must ensure that you have completed the required amount of days to be eligible for a military loan.

Hot Tip:

Regardless of whether you're currently serving, retired, a reservist, or even a military spouse, you can avail of a military loan.

Can Veterans With Bad Credit Have Loans?

Yes, they can. As we mentioned, if you’re a veteran, you can also qualify for a military loan as long as you meet specific eligibility criteria, and that includes the service requirements first and foremost. But there will be some credit guidelines and restrictions that lenders look into as well. This is to facilitate an individual assessment of each application since financial circumstances vary by the borrower. 


Nevertheless, an individual assessment doesn’t imply that veterans with poor credit scores would automatically be deemed unfit to borrow money. Certain criteria exist for lenders to find the most appropriate financial solution.

Requirements to Qualify

The requirements of most lenders only need to ascertain a few things from you: your identity, financial situation, credit score, and service.


Identity Documents

With an identity document, lenders typically require you to submit a copy of your valid ID, like your driver’s license, state ID, Social Security Card, or Passport. But mostly, your military ID would be preferred.


Financial Situation

Lenders also need to assess your financial situation and they do this through an examination of your Current Leave and Earning Statement (LES) and bank statements.


Credit Score

Lenders need to look at your credit score as well, which means that they have to make a hard inquiry. The downside to this is that it’ll show up in your credit report and may pull down your score.


Proof of Service

Finally, your proof of service could either be DD-214 or VA Proof of Service Letter. A DD-214 is a government document issued to veterans after getting discharged from the Army, Air Force, Navy, or Marine Corps. And a VA Proof of Service Letter is obtained from VA eBenefits website.


These documents help verify if you meet the following service requirements:


  1. Active service during wartime for 90 consecutive days
  2. Active duty during peacetime for 181 straight days
  3. 6 years of service in the National Guard or Reserves


Remember, military spouses can apply too if the service member died in the line of duty or due to a service-related disability.

What Do You Need to Know About Personal Loans?

If this is your first time borrowing funds, you need to know about a few key aspects of a personal loan that will help you compare and decide which credit union or bank is best to go for.


  • Interest Rate: An interest rate is what the lender charges you for borrowing their money. This is expressed as a percentage of the principal.
  • APR: The Annual Percentage Rate or APR is the total cost of the loan. This is also expressed in percentages and includes all the costs associated with the loan, such as origination fees, discount points, and interest rates.
  • Principal: The principal is the total amount you borrowed that you need to pay back, plus the interest rate.
  • Origination Fees: Origination fees are upfront costs for processing your loan application. Usually, this can range from 0.5% to 1%.
  • Discount Points: Discount points allows you to reduce interest rates on your loan by paying an upfront fee. Normally, borrowers subscribe to this if they have long repayment terms.

Repayment Terms: A repayment term is the amount of time you have for paying off the remaining balance of your loan. The exact duration will depend on the borrowed sum and other factors. However, on average, most lenders would allow you up to 60 months to pay your debt.

Hot Tip:

Origination Fees often range from 0.5% to 1%.

Types of Personal Loans You Can Get With Bad Credit

While a military loan is actually intended for servicemembers and veterans with bad credit, there are also other options available. Listed below are just some of them:


Home Equity Loans: Home equity loans are ideal for borrowers with less than stellar credit scores because the equity in their home serves as the collateral for the amount borrowed. Although it’s no guarantee, home equity can improve the chances of getting an application approved.


Cash Advances: A cash advance is an amount borrowed against your credit card balance. This is another way to get immediate cash if you have poor credit. But this usually comes with much higher rates than regular personal loans and even higher interest rates from your card’s standard APR.


Joint Personal Loan: Another loan type suited for borrowers with bad credit is a joint personal loan. This enables you to apply with a co-borrower who will share the responsibility of paying off the loaned amount. Naturally, you’d want to get someone who has better credit not just to gain approval but also to get better loan terms and rates.


Bank Agreements: Bank agreements work best if you have a good relationship with your bank. Using this method, your bank could offer you a short-term cash loan without putting heavy emphasis on a poor credit score. However, not all banks deliver this arrangement, so it’s best to consult with your bank about what your options are with them.


Auto Equity Loan

An auto equity loan, sometimes called a car title loan, is much like a home equity loan wherein you use a physical asset as collateral, which, in this case, is your vehicle. Auto equity loans would first need your car to be appraised, and from the appraised value, you can borrow about 25% to 50%. It’s not the most pleasant option since you’re getting only a fraction of its estimated worth, but it’s another way to snag the funds you need.

How Much Can You Borrow?

The exact amount you can borrow relies on a combination of different factors, including the loan type. But a major one greatly influencing loan amounts is none other than credit scores. Borrowers with excellent scores will most likely be deemed more creditworthy and allow lenders to feel more confident in lending money. Most personal loan lenders can offer as much as $100,000 with favorable rates to borrowers with such a high credit score.


However, that doesn’t mean that a high amount is beyond reach for servicemembers and veterans whose scores fall below the average level.  For instance, home equity loans are based on how much equity you have, wherein the more considerable equity you have, the larger amount you can borrow. In fact, you may be eligible for more than $100,000 if your house’s current value exceeds this amount and your equity is already over 50%.

Be Careful With Payday Loans

When you find it hard to get the amount you desire, and your loan choices are limited to merely a few options, it is sometimes easy to get tempted into a payday loan because of its instantaneousness. You can practically get a payday loan or sometimes called fast cash, regardless of your credit score.


However, the tradeoff for this kind of loan is its extortionate rates. In truth, the APR for a payday loan can start from 391% and shoot up all the way to more than 521%.


And what’s sad is that these payday loan lenders still have their sights set on the people who defend the country. This is because most military personnel are young and receive a steady paycheck, making them a gold mine for predatory lenders.


So, it’s always prudent to steer clear of this loan type in weighing out alternatives because it can do you more harm than good. Your short-term financial fix could very well be a long-term struggle.

Boosting Your Bad Credit Score

Now, if you’ve come to realize that the common denominator in securing favorable rates and terms and high loan amounts is a good credit score, perhaps you can consider specific steps in improving bad credit. 


One of the simplest ways to do this is to pay all your bills on time. This is a simple trick to establish a good payment history, which could eventually improve your score. 


Another technique is to keep your credit utilization low. If you have a credit card, you do this by ensuring that you don’t max out your credit limit. A number below 30% is ideal for boosting your credit.

Frequently Asked Questions (FAQ)

Bad credit is typically associated with a FICO score between 300 to 579.

A fair credit score is usually defined by a FICO score between 580 to 669

Most lenders would require that you have completed 90 consecutive days of service during wartime and 181 straight days during peacetime. You need to provide the appropriate documentation, like DD-214, to verify this.

Usually, lenders can directly deposit the funds to your bank account or any U.S. banking institution overseas or stateside bank once your loan is approved.

Yes, while this might be considered a poor credit score, several options would allow you to borrow funds even with a credit score of 550.

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