Debt consolidation for veterans: how to qualify

Military service means making a lot of sacrifices for your country—including financial sacrifices. If you find yourself in debt after you leave the service, you’re not alone. The good news is you don’t have to stay that way. There are many ways for veterans to get rid of debt faster, and one of the most effective strategies is debt consolidation. 

Let’s chat about how a debt consolidation loan could help veterans achieve mission success toward debt freedom, and what it takes to get one. 

Types of veteran debt consolidation loans

Debt consolidation loans work by transferring your debts to a new loan. The idea is to make your debts easier to pay. Your monthly payment may be lower, but you might also be able to lower your interest rate and get out of debt sooner, too. 

In the military, you learned how to take stock of different situations and choose the best tool for the job. You could apply that same skill set to your finances, too. Veterans have a few different tools to tackle their debt:

Read more: Debt consolidation loans for veterans

VA debt help

The Department of Veterans Affairs helps certain veterans with repayment plans and other support for debts that you owe directly to the department itself. This usually happens if the VA accidentally paid you benefits that you weren’t due. For instance, perhaps you forgot to report changes in your family size that could have an impact on your benefit payments. 

The VA doesn’t offer help for other types of debt, such as credit cards. 

Personal loans to consolidate debt

One of the most common ways to consolidate debt is with a personal loan. On average, personal loan interest rates are lower than credit card interest rates. Moving higher-interest credit card balances to a personal loan could help you lower your monthly payment and spend less money on interest as you repay your debt. 

Plus, personal loans usually have a fixed rate—which means you can count on your monthly payment staying the same once the loan is approved and funded. In contrast, credit card rates are almost always variable, which means they can and do change. That means the payment amount could also change, as well as the overall cost of carrying a balance on a credit card.

Home equity loans to consolidate debt

If you’re a homeowner and you have a certain amount of equity in your home, you may be able to use a home equity loan to consolidate your debt. If you qualify, a home equity loan could help you turn some of your home equity (the difference between your home’s value and the amount you still owe on your mortgage) into cash that you can spend. 

Home equity loans are secured loans. That means you pledge something valuable (collateral) as a guarantee that you’ll repay the loan. In this case, your home is the guarantee. That guarantee lowers the risk of loss for the lender, which is why home equity loans are often one of the cheapest ways to borrow. 

Eligibility criteria to get a veteran debt consolidation loan

Lenders set eligibility criteria for the loans they make. Each lender may set different requirements for a debt consolidation loan, so if you’re shopping around, don’t assume all lenders have the same expectations.

The criteria also vary for the different types of loans. We’ll walk through the two most common options for veterans together. 

Personal loan eligibility

Personal loans are usually unsecured loans. In other words, you’ll qualify based on your credit standing and financial situation, not on whether you own something valuable to borrow against. 

The criteria to qualify aren’t hard and fast. At a minimum, you’ll need to meet the lender’s credit score requirements and show that you have a regular source of income, such as Social Security payments or a job.

Home equity loan eligibility

Home equity loans have a few more eligibility criteria in place because your lender will want to look into details about your home and mortgage in addition to your credit standing and finances. A key piece of information is how much home equity you have, because that will determine how much you could borrow. 

All lenders set limits on how much they loan. There’s a dollar limit, and also a limit related to your home’s current market value. For instance, the lender may only allow you to borrow up to 80% of your home’s value, minus your mortgage balance. 

Let’s say your home is worth $500,000 today and you still owe $250,000 on your mortgage. If you qualify, you could borrow another $150,000 and stay under that 80% mark. 

Again, the criteria to qualify aren’t hard and fast, and they do change. You need to be a homeowner with sufficient equity to borrow against. You need to meet the lender’s credit score requirements, which may be higher than what you’d need for a personal loan. Because a home equity loan is a mortgage, you will probably need to show proof of homeowners insurance, and if your home is in a flood zone, flood insurance.

What’s next?

Make a list of your debts. Include the type of debt, the balance, the interest rate, and the payment amount. This information will help you sort out how much you need to borrow, which debts you could consolidate, how much you can afford to pay each month, and whether debt consolidation is a good option for you. Debt experts at Achieve are available to help you make a plan to get rid of your debt.