Loans for Veterans With Bad Credit

It’s no secret that members of the military and veterans often experience financial struggles. Serving your country is a big life commitment, but military service can also mean a big load of debt and bad credit once service ends.

Veterans often have debt, particularly car payments and credit card bills, that they have trouble paying once leaving the military, according to a study by the Consumer Financial Protection Bureau. Average credit scores for veterans who recently left the military are below the average of their non-military counterparts, who had a chance to look for jobs and build wealth.

When it comes time for a veteran with bad credit to get a needed loan, it can be tough. Tough, however, doesn’t mean out of reach.

The best loans for veterans with bad credit, particularly those with a credit score of 580 or below, recognize the financial challenges that are unique to those who have served. They have qualification requirements that take challenges of building credit into account, as well as flexible repayment terms. They also have reasonable interest rates and don’t overload borrowers with fees.

And if a loan isn’t the answer to your financial problem, there are other options for veterans with bad credit who want to find debt relief.

What Veterans Should Look for When Seeking a Loan With Bad Credit

As you research loan options, keep an eye out for elements that apply to most loan offers that may have an impact on your finances:

Standard Requirements

All lenders require that borrowers be U.S. citizens, permanent residents, or living in the U.S. with a valid visa and are at least 18 years old (19 in Alabama). Most also require a Social Security number, valid email address, verifiable bank account and verifiable income.

Origination fees

Origination fees are a percentage of the loan amount. They’re usually higher the worse the borrower’s credit. The amount is often deducted from the loan, so if you apply for a $10,000 loan and it has a 10% origination fee, you will receive $9,000. You will still pay back $10,000, plus whatever the interest is on $10,000.

Fast Funding

Almost all online lenders, and many brick-and-mortar ones, offer funding within one or two business days of approval. That quick availability, though, is ultimately up to your bank. The lender may provide payment in less than 24 hours, but your bank may hold it a day or two. If you need money immediately, check with your bank to make sure it will be there.

Credit Score Impact

With almost every loan, the lower your credit score, the higher the APR and origination fee will be. You also will likely be more limited as to how much you can borrow.

Auto Pay Benefit

The APR cited in many loan offers is often tied to auto payment. That means the monthly payment comes right out of your bank account. If you don’t opt for it, the APR may be higher. Be sure you understand whether that applies before accepting a loan offer. Opting for auto payment is a great way to stay on track with payments and improve your credit score.

Debt Consolidation Loans

Loans that are designed specifically to pay off debt are great. Look for ones that directly pay creditors, which will help ensure the money efficiently eliminates that debt. Make sure that the loan terms don’t make it more expensive than the debt it’s paying off.

Pre-Payment Fees

Almost all lenders allow you to pay off the loan without a pre-payment fee. Double-check to make sure this is the case, though, before accepting a loan offer.

Credit Score Impact for Applying

Most online lenders allow a rate check with a “soft pull” on your credit report, which won’t affect your credit score. If you apply, it will likely mean a “hard pull.” Too many hard pulls in a short amount of time lowers your credit score. Before you check your rate or eligibility, check what impact it will have on your credit score. Most online lenders have that information upfront on their site.

State Lending Laws

Every state has different rules about loans that include interest maximums, the minimum amount allowed, and lender-specific rules. A loan may look great online, but then you find that your state’s rules don’t allow it. Most lenders make clear upfront which states their loan isn’t available, but be sure to double-check before beginning the application process.

Avant

Minimum credit score: 580

APR Range: 9.95%-35.99%

Loan Amounts: $2,000-$35,000 for 12-60-month terms

More Details: Avant has a 4.25%-9.99% administration fee (origination fee), on all loans, though borrowers who pay on time with a fee higher than 5% may be refunded up to 4% of the fee on a prorated basis if the loan is paid in full before the end of the repayment period. Avant has a $25 late fee for payments 10 days late or more and a $15 returned payment fee. Avant also has a pull-down menu on its site so you can check eligibility in your state. Co-signers and co-borrowers are not allowed.

Pros and Cons:

Pros

• 580 minimum credit score
• Portion of administrative fee paid back if paid off early
• Range of loan terms 12-60 months
• State eligibility information

Cons

• High minimum APR
• Administration fee, high late and returned payment fees
• Lower maximum than many lenders
• Currently doesn’t take applications from Hawaii, Iowa, Maine, Massachusetts, New York, Vermont, or West Virginia.
• Co-signers and co-borrowers are not allowed.

What veterans with bad credit should know. Avant says that its average borrower has a credit score of between 600-700. Its qualification terms are flexible, but with its high fees, the better your credit, the better your options elsewhere may be. While Avant doesn’t have any special offers for veterans, it does have information on the SCRA (Servicemembers Civil Relief Act), on its FAQs, which most other lenders don’t provide, and a dedicated program to help military members who qualify. [More on SCRA below].

Lending Club

Minimum credit score: 600

APR Range: 9.57%-35.99%

Loan Amounts: $1,000-$40,000 for 24-60-month terms

More Details: Lending Club has origination fees of 3%-8%. It offers credit card consolidation and balance transfer loans that, if you opt for it, will pay off creditors directly. It also allows co-borrowers. It also lets borrowers know upon application if they qualify for the SCRA or Military in Lending Act (MLA).

Pros and Cons:

Pros

• 600 credit score
• Allows co-borrowers
• Transfer balance loan pays creditors directly
• Notification upon application of SRCA, MLA eligibility

Cons

• High minimum APR
• Longest loan term is 60 months
• High origination fees

What veterans with bad credit should know. The fact that Lending Club determines upon application your SCAR or MLA eligibility is key for veterans applying for loans. It also is an option for any borrower with bad credit, with its low minimum credit score, and the fact that it allows co-borrowers. Bad credit, though, can mean higher APR and origination fees.

Lending Point

Minimum credit score: 600

APR Range: 7.99%-35.99%

Loan Amounts: $2,000-$36,500, 24-72 months

More Details: LendingPoint uses an algorithm that it says goes beyond credit score to determine the creditworthiness of borrowers, meaning that a low score doesn’t necessarily mean rejection. Borrowers must have a minimum annual income of $35,000 and a verifiable bank account. It does not permit co-signers.

Pros and Cons:

Pros

• 600 credit score
• Wide range of loan amounts and terms
• Algorithm helps offset a low credit score

Cons

• High maximum APR
• High origination fee
• Co-signers not permitted

What veterans with bad credit should know. LendingPoint does not have specific offers for veterans. It says its algorithm means “yes” for more borrowers who would be denied a loan based simply on credit score, so if you have a low credit score, but have shown consistent salary, bill payment and don’t have a lot of debt, you may still qualify.

Navy Federal Credit Union

Minimum credit score: NA

APR Range: 8.99%-18% (15.29% for 37 months or more)

Loan Amounts: $250-$50,000, 12-60 months

More Details: Navy Federal Credit Union is open to veterans, retired servicemembers and active duty military members, as well as immediate family, including grandchildren. NFCU doesn’t charge an origination fee. It doesn’t specify a minimum credit score but does base approval and rates on creditworthiness. Co-borrowers are allowed. NFCU also offers a Career Kickoff Loan to students at military academies or in high school military programs that allow them to buy essentials or pay off debt before they join the military, with payment deferred and APR of 1.25%-2.99%. It must be applied for in person or over the phone, rather than online.

Pros and Cons:

Pros

• Low APR
• Wide range of loan amounts
• No origination fee
• Caters to military
• Co-borrowers allowed

Cons

• Creditworthiness counts, but no publicized minimum credit score
• Must become a member to qualify

What veterans with bad credit should know. NFCU was created for the military, so it understands military and veteran financial challenges. Creditworthiness does count toward being approved and getting a good rate, but NFCU also encourages co-borrowers if you don’t qualify. If you have a low credit score but do qualify, your APR will likely be lower than that of other online lenders, and there is no origination fee.

PenFed

Minimum credit score: 620

APR Range: 7.99%-17.99%

Loan Amounts: $1,000-$50,000 for terms of 24-60 months

More Details: PenFed is the nation’s second-largest credit union. Officially Pentagon Federal Credit Union, it is member-owned and therefore offers lower rates to borrowers. It does not charge an origination fee. The higher your credit score, the more likely you are to be approved and get good rates, but it also encourages co-borrowers. If you are not a member, you will become one when you take out a loan, and must maintain a $5 balance in a checking or savings account. It has a $29 late fee and a $30 returned payment free.

Pros and Cons:

Pros

• Much lower maximum APR than many online lenders
• No origination fee
• Originally established for military members, veterans
• Allows co-borrowers

Cons

• May need a higher credit score for approval, good rates
• Must remain a member during the life of the loan
• High late payment, insufficient funds fees

What veterans with bad credit should know. Because PenFed was initially created as a credit union for defense department employees, it is familiar with the ins and outs of military and veteran lending. If you are already a member and have a relationship with the credit union, you may be able to get better rates, even if your credit isn’t good. And it not only allows co-borrowers, it encourages them.

Prosper

Minimum credit score: 600

APR Range: 8.99%-35.99%

Loan Amounts: $2,000-$50,000, for 24-60-month terms

More Details: Prosper is a peer-to-peer lender, which means that investors choose applicants whose loans they’d like to fund, but if you’re a borrower, it’s the same as applying for any other online loan. There is an origination fee of 1%-7.99%, as well as late payment, insufficient funds and check payment fees. It makes clear on its site that the better the borrower’s credit, the better loan terms they’ll get. The average credit score for borrowers is 712. Prosper allows co-borrowers.

Pros and Cons:

Pros

• Lower minimum APR than some online lenders
• Lower origination fee than some online lenders
• Allows co-borrowers

Cons

• Borrowers with bad credit will pay high APR, origination fee
• Other fees include late payment, insufficient fund, check fee

What veterans with bad credit should know. Prosper rewards applicants with good to excellent credit with lower APR and origination fees. It allows co-borrowers, but if your credit score is lower, you will likely find a better deal somewhere else. It does not have special offers for veterans.

Universal Credit

Minimum credit score: 580

APR Range: 11.69%-35.99%

Loan Amounts: $1,000-$50,000

More Details: Universal Credit has a  5.25% to 9.99% origination fee on all loans. Besides personal loans, it has a dedicated debt consolidation loan that has the same terms, but the payoff can be made directly to creditors. It doesn’t allow co-signers.

Pros and Cons:

Pros

• 580 minimum credit score
• Debt consolidation loan available
• High maximum loan amount

Cons

• High origination fee on all loans
• High minimum APR
• Doesn’t allow co-signers

What veterans with bad credit should know. Universal Credit does not have specific veteran offers, but it does have flexible qualification terms that help borrowers with bad credit get loans. Take a close look at the origination fee and APR, though, to make sure it’s affordable before signing on.

Upstart

Minimum credit score: 300

APR Range: 7.8%-35.99%

Loan Amounts: $1,000-$50,000, term either 36 or 60 months

More Details: Upstart uses an artificial intelligence-based formula, rather than a traditional credit score formula, to determine creditworthiness. It says that this has resulted in approval for 44% more applicants than lenders using traditional formulas, with APRs 36% lower; 35% more Black borrowers with APRs 29% lower; 46% more Hispanic borrowers with APRs 34% lower. Many applicants are approved in minutes, without documentation requirements. It has origination fees of up to 8% on many loans. Co-signers are not allowed.

Pros and Cons:

Pros

• AI-based eligibility may result in better results with bad credit
• Approval is fast for many applicants
• Maximum loan amount is high

Cons

• High origination fees
• High maximum APR
• Only offers 36 or 60-month terms
• Co-signers not allowed

What veterans with bad credit should know. Upstart does not have specific offers for veterans, but its AI-driven acceptance program is more flexible for borrowers who traditionally have been marginalized when it comes to building good credit. Many veterans would come under that heading. That said, its origination fee and high maximum APR could still come back to bite someone who doesn’t show creditworthiness in other ways.

Upgrade

Minimum credit score: 580

APR Range: 8.49%-35.99%

Loan Amounts: $1,000-$50,000 for 24-84 months

More Details: Upgrade is a lending marketplace, that provides offers from lenders for a borrower to choose from. The worse your credit, the fewer offers you’ll see. You’ll also see higher APR and origination fees and lower eligible amounts. It charges a 1.85%-9.99% origination fee, and there is a $10 fee if a payment is more than 15 days late or if there are insufficient funds. It allows co-applicants.

Pros and Cons

Pros

• Low minimum credit score
• Range of offers
• Range of loan amounts and terms
• Allows co-applicants

Cons

• Bad credit means fewer options
• High maximum APR range
• High origination fee
• Late fee, insufficient fund fee

What veterans with bad credit should know. Upgrade doesn’t have specific veterans’ options. It does make loans to borrowers with bad credit, but that could mean a high APR and origination fee. A co-applicant could be a good option in that case.

USAA

Minimum credit score: NA

APR Range: 10.19%-18.51%

Loan Amounts: $1,000-$100,000, 12-84 months depending on the amount of the loan

More Details: USAA products and services are available to military members, honorably discharged veterans, spouses, and qualifying children. There is no origination fee for a personal loan. USAA doesn’t say what the minimum credit score needed for a personal loan is, but it does say that credit score counts for approval and good rates. While it uses the term “members,” it is not a credit union, and loans are funded by USAA Federal Savings Bank.

Pros and Cons:

Pros

• Set up by and for military members
• Low maximum APR
• High maximum loan amount

Cons

• Must be a member to apply for a loan
• Credit score counts, but no minimum listed
• High minimum APR

What veterans with bad credit should know. USAA is solely for members of the military, veterans, and their families, so it is focused on the ins and outs of lending to veterans and the challenges they face. While it doesn’t publicize its minimum credit score, its maximum APR is low, so qualifying borrowers will pay much less than they likely would on a loan from many non-military online lenders.

What are Bad Credit Loans?

Bad credit loans cover a wide spectrum. In general, they have flexible credit requirements or are available to borrowers with no credit.

Many lenders are becoming more flexible about credit as they recognize that credit scores aren’t often the full picture and are offering more loan options for people and veterans with bad credit.

Because a borrower’s credit is bad or doesn’t exist, lenders who provide bad credit loans will consider income and employment consistency. This is the biggest factor for qualifying for a loan if you have bad credit. A lender wants to be sure you can pay the loan back. You must be able to demonstrate that you have a reliable income and can stick with a job.

Borrowers with bad credit should be on the lookout for bad credit loans, including payday and car title loans, that have high interest and short terms and can lead to more financial hardship for borrowers.

Loan Protections for Veterans and Military Members

The Military Lending Act (MLA) limits the APR on payday, car title, and personal loans, as well as credit cards, to 36%. The Servicemembers Civil Relief Act (SCRA) requires creditors to reduce interest rates on debts incurred before military members enter active duty to 6%, including credit cards, auto loans, some student loans, and mortgages. The reduced rate for mortgages is good for one year after active military service.

Comparing Personal Loans While Having Bad Credit

Veterans with bad credit applying for personal loans should shop around and crunch the numbers to ensure they’re getting a deal that isn’t going to cost money and potentially make their credit worse.

Online lenders that allow potential borrowers to check their rate without a hard credit pull help make the process efficient. You can understand what kind of offer you’ll get without committing to it. You don’t have to go online, you can also prequalify with your local bank or credit union. Talking to a loan officer in person or over the phone can give you an idea of what you qualify for, and also whether you must do more work on your finances before applying.

The most important things to look at when you have bad credit and are comparing loans are:

• APR: The lower the APR, the less the loan will cost you.
• Hidden fees: Make sure you are aware of and understand all fees. An origination, or administration, fee can cut into the amount that ends up in your bank, but you’ll still have to pay it back.
• Auto-pay discounts: Using autopay can decrease the APR and ensure that your payments are on time, meaning you won’t have to worry about late payment fees.
• Repayment flexibility: Look for lenders that allow you to change your repayment date without penalizing you with a fee, or let you take a payment holiday. Keep in mind, though, that payment holidays can add to a loan’s cost by extending it, meaning you’ll pay more interest.
• Loan terms: Crunch the numbers when determining how long you want to take to repay the loan. It may be tempting to opt for a lower monthly payment, but the longer you pay, the more you end up paying. If you can afford a lower term, go for it. Bite the bullet now, and be happy when the loan is paid off years earlier than it may have been.

How to Get a Personal Loan with Bad Credit

The first step in getting a personal loan with bad credit is understanding your monthly budget. How much a month can you afford to pay? Will the loan displace other monthly payments, for instance, credit cards? A loan that will displace other costs will be much better for your budget than one that will add to them, and also be easier to get if it’s targeted as a debt consolidation loan or credit card payoff loan.

Creating and understanding your monthly budget – what you have coming in, and what you have going out – will help you determine which loan is best for you.

Once you know how much you can afford to pay a month, check out options online with lenders that allow you to check your rate.

You may also want to talk to a loan officer at your local bank or credit union. Talking to a lender can be very helpful as far as understanding what type of loan you can get and what it will mean to your overall financial situation. Local lenders are happy to talk to potential customers, even if you leave without committing to getting a loan.

Choosing the right lender is as important as choosing the right loan. Be sure to consider ease of payment options and customer service when you are shopping around.

Having a reliable income source is key to getting a loan, even if you don’t have bad credit. But if you have bad credit and are applying for a loan, it’s the most vital aspect of your financial life.

Lenders want to be sure you can pay and will focus on your employment history. So don’t switch jobs or quit your job to become an Uber driver (self-employed people generally have to provide information from two self-employed tax years to qualify for a loan).

If you’re not happy with the rates you qualify for while shopping around, it’s probably time to improve your credit score.

Improving credit scores is simple in theory, but can be difficult in real life. Credit scores are based on payment history, the amount of credit used versus what’s allowed, mix of credit accounts, how old credit accounts are and recent credit applications.

Immediate steps you can take to improve your credit score are:

• Make payments on time: The best way to do this is to set up auto pay so that you don’t have to remember when to make payments.
• Reduce your balances: This means not using your credit cards and paying more than minimum payments, so that the balances decrease. You’ll be amazed at how quickly doing this will improve your credit score if your cards are maxed out.
• Don’t apply for more credit: If you’re focused on improving your credit score in order to get a loan, don’t apply for other credit in the meantime, it could hurt your credit score as well as increase the amount of debt you have, which will make it harder to get the loan.

Financial Alternatives for Veterans

If you are a veteran with bad credit and don’t qualify for a loan, or can’t find one with terms that are affordable, there are alternatives. These range from other types of loans to financial assistance.

Let’s take a look at some of the financial alternatives for veterans with bad credit.

Credit Counseling

Credit counseling is a service offered by nonprofit agencies. Their goal is to help you reduce or eliminate debt altogether. A credit counseling session is free and by the end of it, you’ll get a budget overview and debt relief solution that suits for financial situation. For example, a certified credit counselor may recommend a debt management program that will lower your interest rates and lower your debt payment helping you pay off your debt faster and more efficiently.

Secured Personal Loans

A loan can be “secured” by providing collateral to the lender. For instance, an auto loan is secured by the car title. If you don’t pay, the lender repossesses the car. A secured personal loan may mean making a cash deposit or using a savings account to secure the loan. The benefit of using collateral may be a lower APR. Keep in mind you lose the collateral if you can’t pay the loan.

Payday Alternative Loans

Many credit unions offer payday alternative loans, which are small short-term loans, but unlike infamous high-interest payday loans, don’t have huge interest rates. They also don’t require a credit check.

Co-Signer Loans

If you have bad credit but have a family member or friend who doesn’t and is willing to sign onto a loan with you, a co-signer loan may be the answer. The co-signer will have to make payments if you can’t. A co-signer does not have access to the money, a co-borrower does. Some lenders also offer co-borrowers, which is a good option if you don’t mind them having access to the money.

Home Equity Loans or Lines of Credit

If you have equity in a home, you may be eligible for a VA cashout refinance loan, even if your original home loan isn’t a VA loan. The refinancing means getting a new VA-backed loan. The process is the same as getting a VA home loan. The VA backs the loans, but doesn’t finance them, so you must meet the lender’s requirements for creditworthiness.

Assistance Programs

Veterans with bad credit can find help with resources, housing, health care and other financial needs from the government, support organizations and nonprofits:

• The U.S. Department of Veterans Affairs REACH out webpage
• Military Financial Directory
• USA Cares
• Operation Homefront
• Veterans of Foreign Wars (VFW) Unmet Needs Program
• The American Legion Temporary Financial Assistance Program
• The National Association of American Veterans (NAAV)

Job Training and Career Counseling

Job training and career counseling can help improve your financial situation and outlook. Some places to get started are:

• The U.S. Department of Labor webpage devoted to veteran training and job resources
• The Small Business Association Veterans Business Outreach Center program
• USA.gov also has a list of links for veterans who are seeking jobs and training opportunities

Methodology

Our lender reviews take into account data points drawn from the lenders’ most up-to-date online information, including required credit score and other credit requirements, current APR, loan terms and fees. Also considered were mention of veteran services and benefits. All of the information on featured personal loans was analyzed for appropriateness for veterans with bad credit, keeping in mind that everyone’s financial situation is different.