There is a general understanding that military personnel escape many of the financial stresses that the rest of us deal with every day. It is a consequence of their being employed by the government. But, bad credit is a constant specter for military borrowers too, so having to apply for large military loans with bad credit is a reality for them.
But that is not to say their position is not stronger than that of many civilian loan applicants. They are, after all, rewarded for their service to the nation, and have a highly secure employment status. These are advantages when it comes to securing loan approval, and more importantly good loan terms.
But, as is the case with all loan products, lenders are not willing to hand out loans to just anyone. Applicants seeking a military loan, and especially a large loan, need to satisfy criteria and prove that the loan is affordable.
The Advantages Military Personnel Can Get
Being a member of the military brings with it a set of risks that the vast majority of civilians never have to even think about. That would seem enough to entitle them to some breaks when it comes to seeking financing, but there are genuine financial reasons why lenders are willing to grant them large military loans with bad credit.
The principal reason is that the risk of loan defaults is much lower when lending to members of the military. Their employer is the US government, so job security is extremely high. This means that a source of income is about as reliable as it can get. As a result, interest rates are lower and affordability greater, making securing loan approval fairly straightforward.
Another helpful factor is that military loan repayments are made directly from paychecks every month, so the repayment reliability is extremely high too. The Department of Defense marks the monthly repayment as a deduction, and diverts the necessary sum to the lender.
Why Bad Credit Can Be Ignored
But is it wise for military lenders to simply ignore the score standing that a military applicant might have? This seems not, especially when the applicant is applying for a large military loan with bad credit. But ask any lender and they will confirm that the credit score itself is not of any real interest to them anyway.
The score is only a kind of evaluation of the credit past of the applicant. Lenders may look at the score to decide on the interest rate to be charged, but the score is never enough to prevent securing loan approval.
As far as lenders are concerned, it is the ability to repay a large military loan now that overrides any event that might have occurred in the financial past.
Qualifying Is Easy
Qualifying for this kind of loan is very straightforward. This is because issues like age, citizenship and source of income are all covered by the fact the applicant is a member of the military, with all of the necessary information available from military files. It means getting a large military loan with bad credit is easier.
The only real issue that lenders need to check out is whether or not the loan being applied for is affordable. Military personnel are not the best-paid, and so the loan limit may be quite low. When seeking a $20,000 loan, if other loans already exist, securing loan approval may be more difficult.
What must be established is that sufficient excess income is available to meet the repayments comfortably. This means adhering to the debt-to-income ratio, which stipulates a maximum 40% of monthly income be committed to military loan repayments.