Learn About Debt Relief for Veterans
If you are a veteran in debt who is struggling to pay back what you owe, debt relief options are available to you. Several specific methods are available to veterans that help pay off their debts.
If you have a VA loan, you may qualify for a VA Consolidation Loan to make paying off your debts more manageable.
Find out further information about this option in the following helpful overview.
Discover the advantages and disadvantages of a VA Consolidation Loan to determine whether it is the right course of action for you before exploring this option.
In the following guide, learn of other debt relief options available to you. These include debt settlement methods such as the VA Loan Compromise.
Additional information about how to manage your debt more easily and effectively is also included. If you need any further advice on debt relief, the Department of Veterans Affairs can also assist.
Learn About VA Consolidation Loans
If you have a VA loan, you may be eligible for a VA Consolidation Loan. This operates in the same way as a standard debt consolidation loan.
The process involves taking out one loan to pay your accumulated debts. These include items such as credit card bills, payday loans and medical bills.
Rather than having to repay each creditor, you make one payment toward the consolidation loan.
Commonly known as a Military Debt Consolidation Loan, the VA Consolidation Loan is a “cash out” loan.
This means you refinance your present loan for an amount that is more than what you owe. The difference is taken in cash. Closing costs must be paid during this process, which are taken from the final amount.
If you owe $60,000 on your home, you may be eligible for an $80,000 VA Consolidation Loan.
The actual amount you receive depends on an appraiser’s value of your property. In this scenario, you have $20,000 left.
Once the closing costs have been subtracted from this amount, the funds left over are used to pay off your debts.
This includes medical bills and credit card bills. Although the VA acts as a guarantor for the refinancing of your loan, the value of your new loan cannot be more than the appraiser’s value of your property.
To qualify for a VA Consolidation Loan, you must meet specific criteria to ensure you are going repay the amount.
Your credit score and your income level are considered to determine your eligibility for the consolidation loan.
Be aware, the process of a consolidation loan takes your unsecured debt, such as medical bills, and turns it into secured debt.
This means your property acts as collateral. Those who default on mortgage payments may lose their home.
Learn About the Advantages and Disadvantages of a VA Consolidation Loan
Advantages and disadvantages of taking out a VA Consolidation Loan exist. The major disadvantage of this type of loan is you lose your property’s equity and take on more debt.
In addition, the closing costs you pay vary depending on your lender. Balloon payments or pre-payment penalties may be involved as well.
The benefits often outweigh the drawbacks. One of the main benefits is it is paid back over a long period of time.
Often, the payments are spread out over 10 or 15 years though this escalates to 30 years in some instances.
In addition, the qualifying standards for a VA Consolidation Loan are easier than with a regular consolidation loan. Other advantages of a VA Consolidation Loan include:
- Paying lower interest rates than civilians.
- Paying much less interest than you would via other payback methods.
- Paying lower closing costs than civilians.
- Lower debt-to-income and credit score requirements.
- No prepayment penalties or monthly mortgage insurance premiums.
Learn About Debt Settlement for Veterans
If you do not qualify for debt consolidation and if you are not a homeowner, go down the route of debt settlement.
This involves negotiating your present debts to reduce the total amount you owe. To go through the process of debt settlement, it is usually best to get help from a respectable debt settlement company.
If you do choose this option, it has the potential to seriously affect your credit rating.
Debt settlement is achieved by using specific credit cards for veterans.
Various cards are available for veterans that come with no annual fees or fees for balance transfers, foreign transactions and cash advances.
By combining these advantages, you save substantially on your credit card bills. You then use those savings for debt settlements.
Veteran-specific credit cards include:
- A Visa veteran tickets credit card.
- A Chase military credit card.
- An Air Force Federal Credit Union credit card.
- A Navy Federal Credit Union credit card.
- An Army Credit Union-granted credit card.
Learn About a VA Loan Compromise
This debt relief option is similar to a debt settlement, but it does not require the assistance of an agency.
You may qualify for a VA Loan Compromise through the U.S. Department of Veterans
Affairs if you have a VA debt due to an education loan, a home loan guaranty or an accidental overpayment of your benefits.
To request a loan compromise, submit a letter to the Department of Veterans Affairs.
The letter needs to comprehensively explain the offer you are making and the reason for why you are making the request.
Ensure you state the exact amount of money you are offering to settle the loan. In addition to the letter, submit VA Form 5655, which is a financial status report.
This form gives specific details about your ability to pay. The Department of Veterans Affairs then determines whether your offer is reasonable and therefore accept your terms.
Learn About Other Debt Relief Options
If VA Consolidation Loan or debt settlement options are unsuitable for your personal situation, other debt relief options are open to you.
If your debts are confined to amounts you owe on credit cards, you have the option of refinancing your credit card debt by transferring your balance to a different credit card.
Various credit card companies and banks offer zero percent interest for periods of up to 18 months.
Usually you pay a transfer fee which ranges from three to five percent, but those fees are often worth paying. If you manage to pay off your balance during the introductory period, you are on top of your credit card debt.
Another option is to find out if you are eligible for a debt management program. Talk to a nonprofit credit counseling agency to discover more about the qualification criteria.
If you are eligible, you reduce the amount of interest you pay as well as the monthly amount you pay without needing to take out another loan.