Debt consolidation for veterans

By Gina Freeman

Reviewed by Keith Osmun

Aug 22, 2023

Soldier embracing his wife and kids on his homecoming.

Key takeaways:

  • Veterans can face unique debt challenges when leaving the military.

  • Debt consolidation options for veterans include home equity loans, personal loans, and balance transfer cards.

  • Debt consolidation isn't right for every veteran. Debt resolution may be a more affordable alternative.

Service members do a lot of growing up during their active duty years. But while you were learning how to do your part to defend our nation, there might not have been many opportunities to practice money management skills. In fact, when you transitioned to private citizen life, you may have found yourself paying for housing, utilities, healthcare, and other everyday expenses for the very first time. 

When it comes to managing debt, your military training can be a huge asset. If you’ve learned how to be disciplined, make timely decisions, meet challenges, and take responsibility for your actions, you’re ready to reach the next financial level in your life.

A debt consolidation loan is one of many tools you can consider as an option for managing your debt.

What is debt consolidation for veterans?

Debt consolidation means taking a new loan and using it to pay off multiple smaller debts. Debt consolidation for veterans could make the debt more affordable. It may help stop a cycle of expensive borrowing. 

The idea is to choose a debt consolidation loan with better terms than the accounts you’ll pay off. “Better” terms can be lower interest rates, smaller payments, or more time to repay. 

Debt consolidation doesn’t reduce what you owe. But it can reduce the number of bills you have to pay and could make your balances easier to pay off. For instance, suppose that you have three credit cards:



Interest rate

Minimum payment

Card A




Card B




Card C




You’re paying 27.4% on average in interest, and your total monthly payment is $394. If you keep paying this amount as your balances go down, it’ll take 39 months to pay off your accounts. You’ll end up paying $5,120 in interest.  

What if you consolidate your debt with a loan that has a 10% interest rate?

  • A 3-year loan has a $323 payment. You’ll pay $1,616 in interest. This scenario would save you $3,520.

  • A 5-year loan has a $212 payment. You’ll pay $2,748 in interest. This scenario would save you $2,372. 

Benefits of debt consolidation for veterans

Don’t consolidate debt unless there’s a clear benefit. You would want to reach one or more of these goals:

  • Lower interest rates

  • Smaller payments

  • More time to pay

  • Fewer bills to pay each month

You could also benefit by moving your debt from a variable interest rate (like most credit cards have) to a loan with a fixed interest rate. Credit card rates change along with the economy. Your cost and payment amount can be unpredictable. Fixed-rate loans have an interest rate that doesn’t change. Your payment stays the same until you pay off the loan. Achieve only offers fixed-rate loans.

One last benefit to mention is that consolidating debt has the potential to improve your credit standing. That’s because high credit card balances can hurt your credit score, but loan balances don’t affect your credit standing the same way. So even though you have the same amount of debt, changing the type of debt could have a positive impact.

Debt consolidation options for veterans

Veterans with unsecured debts like credit cards, medical bills, and personal loans can consider a few different approaches. The right one depends on your qualifications and how much you owe. Here’s a quick run-down.

Personal loans

Personal loan interest rates tend to be lower than credit card interest rates. Like credit cards, most personal loans are unsecured. That means you qualify based on your credit standing and financial situation. Some lenders offer secured personal loans. To qualify for a secured loan, you would need to have something valuable to borrow against (collateral). 

Personal loans often range from $1,000 to $50,000, with repayment terms of one to five years. Most personal loans have a lender fee that you can pay out of pocket or have deducted from your loan funds. If a loan has no lender fee, expect the interest rate to be higher.

Read more: How to use a personal loan for credit card debt

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Home equity loans

A home equity loan for debt consolidation can be a great way to streamline your bills and potentially lower the cost of your debt. Home equity loans and home equity lines of credit (HELOCs) tend to offer better terms than most personal loans because they are guaranteed by an asset (your home).  

If you own a home and have enough equity to qualify, a home equity loan may be a way to do debt consolidation with bad credit. (Equity is your home’s value minus your mortgage balance.) If you’re using your home equity loan to pay off other creditors, you might be able to qualify with a lower credit score compared to what other loans require. 

A home equity loan or HELOC is a second mortgage. Home equity loan closing costs are similar to the costs for other mortgage loans. Most lenders charge a lender fee, and they may require a property appraisal, title insurance, and escrow services. Because of these additional requirements, home equity loans might not make sense for smaller amounts. But their low rates and longer terms make them a great choice for covering large expenses and keeping payments low.

A home equity loan is a one-time lump sum, and a HELOC is a line of credit that allows you to borrow, repay, and borrow more for a few years.

Read more: HELOC vs. home equity loan: similarities, differences, and how to choose

Homeowners, get help with your high-interest debt

Use the equity in your home to consolidate debt, lower your monthly payments, and reduce your stress.

VA cash-out refinance mortgage

The VA cash-out refinance is another way to use home equity for debt consolidation. With a cash-out refinance, you apply for a new mortgage that’s bigger than your current home loan balance. The lender pays off your mortgage and gives you the difference in cash that you can use to pay off other debts. You can refinance a VA or non-VA home loan.

VA cash-out refinancing has two advantages. First, the VA may allow you to borrow more than you could with another type of mortgage. That means you could get more money to pay off debt. Second, there is technically no minimum credit score for a VA home loan. All lenders have a minimum credit score requirement, but some allow a lower score for a VA loan compared to other kinds of loans. 

What is the Military Debt Consolidation Loan (MDCL)?

Some lenders offer a Military Debt Consolidation Loan (MDCL). There is no mention of this product on the VA’s website and the VA does not back home equity loans. If a lender is promoting an MDCL cash-out refinance that’s only available to eligible veterans, it’s a VA cash-out refinance mortgage. 

Balance transfer credit cards

Balance transfer credit cards let you move a balance from another credit card, at low or no interest for a period of time, usually 6 to 21 months. 

Expect to pay a balance transfer fee that offsets some of your savings. Also, if you don’t clear your balance before the promotional interest rate expires, you might be tempted to do another balance transfer. This financial juggling can become a pattern that’s hard to stop. It’s sort of like spinning plates on sticks. Eventually, they will come down. Your best bet is to consider a balance transfer a one-time strategy. And if you use one card to pay off another card, close the paid-off account to protect yourself from the chance of racking up more debt.

Debt resolution as an alternative for veterans

Debt resolution can be a better option for people who don’t qualify for a new loan or who can’t afford to repay their debts in full. Resolving debt means working out a lower debt payoff with your creditors. This is usually a lump sum but can sometimes be a series of payments. 

Anyone can negotiate their debts. You can also work with a professional debt resolution company. Reputable companies have relationships with many creditors and may be able to get better results than you could get on your own. 

To negotiate a debt, you can make a single lump sum offer. If you don’t have money to make an offer, you can save it up. A debt resolution company can set up a dedicated account for this purpose. Some creditors will agree to a series of payments. 

When you reach an agreement, you pay the discounted amount, and the debt is canceled.

Debt resolution could be a good idea if you can’t afford to repay your debts in full without some degree of forgiveness. There is no minimum credit score requirement. 

Leave debt behind, so you can move forward

Get rid of your debt and free up your cash flow without a loan or great credit.

Steps to take before choosing debt consolidation

Debt consolidation should make your life easier. Before choosing a debt strategy, ask yourself a few questions:

  • What is my goal for debt consolidation? A lower payment? Better interest rate? Fewer checks to write each month?

  • How much do I need to borrow to pay off my debts?

  • Can I afford the payment on a debt consolidation loan?

  • Can I qualify for a debt consolidation loan?

The answers to these questions can tell you if consolidating will solve your problem. If so, here’s how to get a debt consolidation loan. If not, talk to a professional debt consultant about other options.

Gina Freeman - Author

Gina Freeman has been covering personal finance topics for over 20 years. She loves helping consumers understand tough topics and make confident decisions. Her professional history includes mortgage lending, credit scoring, taxes, and bankruptcy. Gina has a BS in financial management from the University of Nevada.

Keith Osmun

Keith is an editor and fact-checker for Achieve. He makes sure the content is accessible by ensuring that each piece has impeccable grammar, an approachable tone, and accurate details.

Frequently asked questions

The VA does not have a debt consolidation program. Veterans can use standard programs like the VA cash-out refinance to consolidate their debts. In addition, veterans can consolidate debt using personal loans, home equity loans, or balance transfer credit cards.

Debt consolidation loan programs have varying requirements. Your credit and income need to meet a lender’s guidelines. If you don’t qualify for a debt consolidation loan with better terms than the accounts you plan to consolidate, you could consider debt resolution. Resolving debts means negotiating with your creditors to accept less than the full amount you owe.

The VA doesn’t have a debt consolidation program. It does have several programs to help veterans with medical debt, disability waivers, problems paying a VA mortgage, homelessness, and other issues. In addition, active-duty servicemembers are protected by the Servicemembers Civil Relief Act (SCRA). This limits interest rates on existing debt and protects them from repossession, foreclosure, and default judgments while on duty.

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