Debt Relief Options for Veterans
Financial stress and hardship can hit any family or individual. But, for veterans, securing loans or other funding to help pay for emergency bills or expenses may come with more options than the average consumer has available. Certain credit unions and other lending institutions may offer interesting rates for veterans. And in some cases, even veterans with low credit scores may have access to better loan options and interest rates.
Financial status and money management habits are unique to every family. But there have been studies that have specifically looked at the financial security of veterans and how it compares to non-veterans.
According to a report by Finra Investor Education Foundation, “veterans are 5 percent more likely to be satisfied with their current financial condition; 4 percent less likely to report having difficulty in covering their expenses and paying their bills; and no more or less likely to have experienced an unexpected income drop in the past 12 months.”
However, the same report also found that veterans had a 12 percent higher likelihood of overspending each month (spending exceeds income) and had a higher issue of “problematic credit behaviors.” But veterans were keener on setting a budget.
What happens, though, when those expenses exceed income and emergency bills hit the budget even harder? Veterans have access to many different options, but research is vital to discovering which choice is best for a particular situation.
Home Equity Line of Credit
Veterans who own their home—and have equity in their home—may qualify for a Home Equity Line of Credit (or HELOC).
These are lines of credit that are tied to the equity in your home. When applying for a HELOC, your home needs to be worth more than the outstanding mortgage principal. And each lender may have specific equity standards that are required to underwrite the HELOC.
You can typically use your HELOC to cover home repairs or other emergency expenses, but be sure to talk with your lender about any usage restrictions—they can go over specifics.
Remember that once you tap into your home’s equity, if you need to sell your home, you may make less money on the sale. The money you owe to both your mortgage lender and your HELOC lender will be paid from the sale of your home.
Technically, the lender who underwrites the HELOC has a lien—or financial claim—against your home. Use only what you need from your HELOC and pay it back as quickly as possible.
Family Member Loans
Your parents or other family members also may be able—and willing—to give you a personal loan to cover medical bills or other expenses. However, borrowing money from family can get sticky.
Some family members call it a ‘gift’ and don’t expect repayment, but others treat the transaction as a loan. Be sure to write up any loan terms including repayment expectations. Stick to your obligations as you would with any lender.
What if you have poor credit?
A low credit score may lower your chances of getting a loan at traditional lending institutions. But, again, some lenders may be willing to work with those with lower scores. However, your interest rate will often reflect the credit risk of a lower score.
There are lending sites that allow consumers to shop around with different lenders, and this may be an option for individuals with lower scores. There may be credit score lending thresholds, however. A score that falls below the lender’s terms may not be eligible for approval.
You should always investigate all your options and see what is available based on your credit score. Before you sign on the dotted line, read over all the terms and conditions including the interest rate and/or loan fees. Be sure to allocate the monthly payments into your budget so you don’t fall behind on payments.
What about Payday Loans or Title Loans?
Veterans also can look into loans that are secured by other sources of equity. Payday loans allow consumers to borrow against the next paycheck; once you get paid, the loan payment is typically owed as one lump sum.
But some borrowers get into a bind with payday loans—especially if they still need all the money from the next paycheck. If you’re already living paycheck to paycheck, borrowing against your payday might not be the best idea. Look at your finances and be sure that you can pay the loan back on time.
Title loans are a bit different than payday loans. These loans use the equity of your car as the collateral for the loan. You can’t borrow more than the car is worth and there also may be borrowing caps because of lender guidelines or state guidelines. The interest rates for title loans also vary; some states set guidelines for rates, others don’t. And rates also vary because of credit risk; those with a good credit score will have more favorable loan terms.
Make sure you understand what you need for a title loan. Remember you must always read the terms and conditions of your loan. Review the interest rate and loan fees of your loan so you understand the monthly payment obligations. Always allocate the monthly payment into your budget.
Options beyond Loans
Debt relief options go beyond loans. If you’re in a financial bind, you don’t necessarily have to borrow money. So how else can you make more money to pay for those unexpected expenses?
Take on a side job. This could mean a weekend job or just a one-day per week side gig. Just make sure there are no conflicts of interest. There are many local businesses that need part-time help, so start the job hunt.
Be a seller. Etsy and eBay are just two sites that thrive on the seller economy. So what can you sell? List brand-name clothes that are in good condition (but maybe don’t fit). Nice shoes. Dishware. Funky household collectibles. You can list anything! Just be sure to note your income for tax purposes (talk to an accountant about your tax obligations, too).
Become a rideshare driver. Driving for Uber or Lyft may be another way to work during off-hours and make some extra cash. What you make could vary, and you need to have a reliable car for this gig. The condition of your vehicle will definitely play a part in your reviews, so keep it clean and clutter-free.
Save Before You Need Cash
One of the best ways to find money for emergency expenses and debt relief is to begin a savings fund ASAP. The goal is to make sure you never have to borrow money or hunt down extra gigs when the stress of extra expenses hit home.
Saving money can be a challenge for those who haven’t made a habit of saving. Start small…and slow. You can start putting extra change in a jar (yes, this adds up). But for bigger savings goals, allocate a specific dollar amount each week that you can stash into savings. If you were gifted money for the holidays or for a birthday, put it into savings, too.
Of course, tax refunds should be allocated for savings. You may need to spend a portion of your refund for expenses, and that’s ok (and normal for many families). But save a portion of that refund. Save as much as you can. That refund may easily help you buy a new fridge, a set of new tires or pay down an emergency room bill.
Be Wary of Credit Cards
A big way to keep finances in order is to watch out for overzealous credit card spending. Credit cards should be used for emergencies not as quick cash for ‘wants.’ Before you charge it, decide if the item is really a necessity.
Work hard to pay down credit card balances, too. Remember that interest is constantly accruing on those card balances. If you’re only paying the minimum monthly payment, then you may be paying off purchases for a very long time. Instead, pay more than the minimum; yes, even if it’s only $10 each month. And don’t charge more purchases to the card unless you absolutely must use that credit (e.g. new tires, car repairs, etc.).
If you’re a veteran, and the month has meant blow after financial blow, you do have options for debt relief. There are numerous financial institutions that offer lower interest rates for veterans on personal loans. You also can explore a HELOC or other loan to help pay down debts. But paying down debts or bills doesn’t mean you have to take out a loan.
Find ways to earn more money and start building a savings account for future financial emergencies. Saving money takes time, but it’s often the best way to ensure that you have a nest egg in place for those unexpected financial fiascos. Ideally, the best debt relief options should mean not accruing more debt in the process.