Five Military Debt Relief Programs
Members of the military have plenty to worry about when they are serving our country and the last thing they need is a little voice inside their heads whispering: “Did you pay the mortgage and credit cards off this month?”
The good news is laws protect them from many civilian credit worries. The bad news is a lot of military personnel still suffer severe financial difficulties and have a hard time finding debt-relief options. Here are four programs designed to help active duty military and veterans with debt relief:
- Servicemembers Civil Relief Act: Regulates interest rates for credit cards, auto loans and other financial services for active duty military. Also requires landlords to let you out of your lease, without penalty, for deployment.
- Military Lending Act: Servicemembers cannot be charged more than 36% interest for credit products.
- Veteran’s Housing Benefit Program: offers loans to veterans at very low rates.
- Nonprofit Credit Counseling: Free financial counseling provided by nonprofit companies like InCharge Debt Solutions.
If you are an infantryman in Afghanistan or a civilian in Topeka, debt consolidation – whether it’s a debt management program, a debt consolidation loan, debt settlement or in the most severe instances, bankruptcy – can ease the strain. There is no financial strain quite like military financial strain, but there is help.
Military & Veteran Debt Consolidation Loan Options
If you are looking for a debt reduction plan, a good place to start would be examining the interest rates you pay on your current bills, especially credit card debt and compare those against the interest rate charges for a debt consolidation loan.
Debt consolidation is taking out one loan to pay off several smaller loans. It is most often used to eliminate credit card debt because debt consolidation loans have far lower interest rates and agreeable terms.
There are several types of debt consolidation loans – personal loan, home equity loan, balance transfer loan, loan from family or friends – and each has its advantages and disadvantages.
- Personal loan. This is the most common form of debt consolidation. You go to a bank, credit union or online lender, ask for the amount you need, they check your credit score and payment history and approve or disapprove your loan. Personal loans accounted for $138 billion in borrowing in 2018, a 17% increase over 2017. Online lenders are doing most of the new business in this area.
- Home equity loan. This loan has the lowest interest rates for one very important reason: You are putting your home up as collateral. If you miss payments, you could lose your house. In return, you get interest rates as low as 6% compared to the national average of 17% for credit cards.
- Balance transfer cards. The attraction here is that you pay 0% interest for an introductory period (usually 6-18 months), giving you time to pay off credit card bills at no interest. However, it’s very difficult for people already in trouble with credit cards to qualify for a 0% interest card. If you do qualify for one, you must pay off your debts in the allotted time or your rate soars to 18%-20% or higher.
- Family or friends. This could be the place to get the lowest rates and best repayment terms IF both sides trust each other and act responsibly. IF they don’t, this can ruin relationships and be a really bad idea.
If you’re not happy with any of these choices, you could consolidate your debt without a loan through a nonprofit credit counseling agency. Counselors walk you through the steps of setting up a monthly budget and then recommend debt-relief options.
One of those is a debt management program, which doesn’t require a loan and doesn’t consider credit score as part of the qualifying process. Debt management programs are a good way to eliminate debt, increase your credit score and relieve stress from financial problems. Counselors work with lenders to reduce the interest rate you’re paying and the amount of your monthly payment so that all debt is eliminated in a 3-5 year time frame.