Military servicemembers and even veterans have a couple of problems that makes traditional personal loans more difficult compared to civilians.
For one, they need a flexible payment system that will allow them to avoid default while they are stationed overseas.
They also need a lender who understands the lifestyle and professional demands of those serving in the military. After all, anything can happen while they are fighting battles.
Finally, these lenders should understand that while someone is deployed, it can be hard to maintain a good credit score.
This is why military loans can be a great financial product. However, you need to be cautious when you borrow one. There are a lot of predatory practices that will try to lure you into borrowing a loan that will make you pay so much more than what is necessary.
Here are 10 tips that will help you be wise as you borrow military loans.
1. Know your financial position.
You need to study your source of income and the expenses that it is funding. The relationship between your income and expenses will have a significant effect on how much you will borrow. Not only that, your debts and savings will also influence your ability to borrow military loans.
2. Have a good reason to borrow.
A debt is only as good as the reason for borrowing it. If you will use it for something that will put more money in your pocket, that can be considered a good debt. For instance, if you will use it to buy a product that will make you more efficient at your job.
3. Understand your loan options.
This will help you make a smart decision about the type of military loan that you will borrow. For instance, you can borrow a loan with a fixed interest or a variable interest. The former uses only one interest rate – usually the one that will be given to you when you apply for the loan. The latter refers to an interest rate that goes up or down, depending on the current market index.
4. Make sure your credit score is high.
A high credit score means you are a low-risk borrower. Most of the time, this will guarantee that you will get a low interest on your loan. For military personnel, this is usually a problem because maintaining a high credit score is difficult when you are deployed. But with military loans, this is usually given a low importance – as long as you can prove that you are a responsible credit holder.
5. Get to know different lenders.
Choices are always good. You have to get to know more than one lender in your pursuit to borrow military loans. Look at the qualifications of the lender, references, reviews, and check out authority sites like the Better Business Bureau. Due diligence is very important especially when you plan to borrow online.
6. Check with your own bank first.
Although you may have done your research, it is still advised that you talk to your existing bank first. Sometimes, banks, credit unions, and other financial institutions give special rates to existing clients. They already have access to your records and payment behavior – that could work in your favor.
7. Research the latest rates.
A military loan with competitive rates means it has to have the lowest rates in the market. But beyond that, you also have to consider that fees that you have to pay and the penalties that could be charged to you. Sometimes, borrowers make the mistake of focusing on low-interest rates that they fail to realize they are agreeing to pay huge fees.
8. Be prepared with a repayment plan.
Never get into debt without having a payment plan in place. If you have no idea where you will get the money to pay the loan, then do not borrow. You will only make things worse for your finances.
9. Make sure there is an online access.
Since military borrowers have a unique professional arrangement, an online access is a must. You might be deployed overseas all of a sudden. An online account will allow you to arrange and track payments while you are away.
10. Do not ignore the customer service reputation.
Finally, before you finalize where you will borrow military loans, you have read about the customer service reviews of the lender. Something might go wrong with your loan and you might have to call the lender several times. A great customer service will make things easier for everyone. Take note that this is also something that you need to consider for your loved ones. After all, being in the service means you are putting your life on the line. If something happens to you, the lender should be able to help your family with the financial transactions associated with your passing.