5 ways veterans can benefit from debt consolidation

By Dana George

Reviewed by James Heflin

Jul 10, 2024

Read time: 4 min

Happy soldier sitting on the floor with his family. Soldier and his wife enjoying at home with children

Key Takeaways:

  • Many military veterans have debt.

  • A debt consolidation loan is a great way to create a repayment plan that includes a firm payoff date. 

  • Debt consolidation could help you lower the cost of your debt, which could help you pay it off sooner.

You’re a veteran. You already have the strength and resilience to tackle any challenge. Those skills don’t end when civilian life begins. You’re equipped to navigate the unique challenges of civilian life. There are strategies to help you handle your debt no matter how it came to be. 

One option for dealing with debt (so you can get rid of it once and for all) is debt consolidation for veterans. It’s a strategy that helps you streamline your debts and hopefully pay them off faster. 

What is debt consolidation?

Here's how consolidating debt works:

  • You take out a single loan and use it to pay off multiple other debts.

  • Instead of making payments to different creditors, you make one loan payment each month.

  • As long as the interest rate is lower than the rate you were paying on the other debts, you could save money. 

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Debt consolidation example

Let’s say you’re juggling $10,000 across five credit cards, with an average interest rate of 24%. Your minimum payments total $300 this month. If you keep making the minimum payments as your balance goes down, as credit cards let you do, it’ll take you almost 30 years to pay off this debt and you’ll pay more than $19,000 in interest.

If you continue to pay $300 a month, it’ll take about 4 years and 8 months to pay off the debt, and you’ll pay $6,700 in interest. That’s better than making only the minimum payments.

But suppose you qualify for a debt consolidation loan at 12%. The lender charges a fee of $500 to make the loan, so you borrow $10,500. Your payment drops to $280 and you could knock out this debt in four years.

Pro Tip: Research lenders who conduct soft credit checks to let you know if you qualify for a loan. A soft credit check doesn't impact your credit score. 

How veterans could benefit from a debt consolidation loan

1) Potential positive impact on your credit standing

Moving credit card debt to an installment loan could have a positive impact on your credit score. That’s because high credit card balances can hurt your score, but installment loan balances don’t affect your credit standing in the same way. 

Paying off your credit cards with a loan and lowering your credit utilization could boost your score, especially if you avoid increasing the balances on your credit cards later. Credit utilization is how much money you owe on your credit cards, compared to how much credit you have available. 

Your payment history also has a big impact on your credit standing. Paying your bills on time every month puts you in the best position to improve and maintain your credit.

Achieve is not a Credit Repair Organization and doesn't provide, or offer, services or advice to repair, modify, or improve your credit.

2) Reduced stress

It'll come as no surprise that debt is stressful. In fact, the American Psychological Association (APA) reports that money is the number one cause of stress in the U.S. When you take out a debt consolidation loan to pay off other debt, you don't immediately have less debt. What you do have is a plan to rid yourself of that debt—and having a plan you know will work can be a great stress-reducer. 

3) Light at the end of the tunnel

Being in debt can make it feel like your life is on hold. For example, you may feel you can't create a realistic household budget , build an emergency fund, buy a home, or go on vacation. All financial decisions hinge on the money you owe. Worse yet, when you're afraid you'll drag that debt into the future, making plans seems futile. 

A consolidation loan gives you the end date you need to begin planning. Let's say you take out a 36-month loan to consolidate high-interest debt and a few medical bills. As long as you make all payments in full and on time, you know for sure when that debt will be paid off. Once you know when the debt will be gone, you can plan with confidence. Knowing there's light at the end of the tunnel frees you up to dream of the future. 

4) Sense of accomplishment

Taking the steps to get rid of your debt can boost your ego and your spirit. Each month, as you get closer to your goal, you'll feel a little better about how you've chosen to handle the stress of debt. The closer you get to paying off your consolidation loan, the easier the entire process feels. 

What's more, once you get used to how good it feels to be in financial control, the more you're likely to want to stay there. That may mean learning more about how your money can work for you. After all, millionaires and billionaires sometimes go bankrupt, proving it's not how much money you earn that matters. It's how you manage the money you earn. 

5) Begin the next chapter

Whether you're just planning to leave the military or have lived a civilian life for years, a debt consolidation loan could help you begin the next chapter of your life. There's no shame in debt. Most of us have been there, and millions of us have found a way to climb out of that debt. If you’re ready to level up your finances, a debt consolidation loan is one tool you have at your disposal. 

The truth is, you're bigger than the debt you owe. It in no way defines you. Outsmarting that debt is just one of the many accomplishments you'll surely reach in life.

Dana George

Dana is an Achieve writer. She has been covering breaking financial news for nearly 30 years and is most interested in how financial news impacts everyday people. Dana is a personal loan, insurance, and brokerage expert for The Motley Fool.

James Heflin - Author

James is a financial editor for Achieve. He has been an editor for The Ascent (The Motley Fool) and was the arts editor at The Valley Advocate newspaper in Western Massachusetts for many years. He holds an MFA from the University of Massachusetts Amherst and an MA from Hollins University. His book Krakatoa Picnic came out in 2017.

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