Military and Veteran Debt Relief

Veteran Debt Relief

Veterans Affairs (VA) loans play a significant role in the overall landscape of veteran debt, yet they remain commonly misunderstood. VA loans make it easier for military members, veterans and their families to become homeowners, with the VA guaranteeing up to 25% of the loan amount while placing restrictions on what degree of fees banks can charge, making these loans more affordable.

Importantly, when members of the military run into financial trouble, if they already have a VA home mortgage, they can leverage a VA loan to qualify for a Military Debt Consolidation Loan (MDCL) ranging up to the appraised value of their home.

Advantages of MDCLs include lower interest rates and closing costs than are charged in typical debt consolidation loans to ordinary civilians, along with a wide range of repayment terms often stretching as long as thirty years.

MDCLs also are a form of “cash out” loans, meaning that they are a form of refinancing that involves a greater loan amount than the current level of debt, resulting in the opportunity to utilize excess cash to pay off credit cards, medical bills and other forms of unsecured debt.

An important drawback to MDCLs, however, is that they are secured loans collateralized by home equity, effectively taking unsecured debts and converting them into a form of secured debt. With a dwelling now serving as collateral, it can unfortunately be seized in the event of default.

There also are closing costs involved in taking the loan, and there can be a prepayment penalty and/or balloon payment, depending upon the lender. However, owing to the Uniform Code of Military Justice Article 134, which sets rules for “unbecoming behavior” among military personnel, the practical benefits of MDCLs often outweigh these negative considerations.

Military personnel must have their financial house in order so as not to appear untrustworthy, lacking in judgment and potentially susceptible to instances of bribery – hence, the wrong financial profile often can lead to a loss of security clearance that hampers job advancement and higher pay.

Veteran Debt Consolidation

When considering various veteran debt relief options, veteran debt consolidation certainly resides near the top of the list. Qualifying for an MDCL loan is also easier than qualifying for conventional debt consolidation loans.

Veteran debt consolidation offers several advantages over traditional debt consolidation, depending on the financial institution, with a lower credit score requirement and debt to income ratio standard commonly in place.

Banks and lenders dealing in VA loans also are limited by the amount of closing costs that they can charge. Meantime, for military personnel and veterans who are not homeowners or otherwise do not qualify for veteran debt consolidation, the option of debt settlement remains a viable form of veteran debt relief.

Debt settlement takes place when a debtor successfully negotiates a payoff amount for less than the total balance owed. Debt settlement typically focuses on unsecured debt, including unsecured debts owed to the VA.

Veterans can pursue debt settlement with veteran-specific credit cards that include Chase military credit cards; Army, Navy and Air Force Federal Credit Union credit cards; and Visa Veteran credit cards.

Veteran Debt Relief Grants

Veterans who are struggling to make ends meet following a tour of active duty have access to a variety of veteran debt relief grants that can be useful. USA Cares has helped over 100,000 veteran families to keep their homes through allocating over $10 million in grants to veterans burdened with PTSD, unemployment and the possibility of foreclosure.

Other organizations that provide financial assistance to veterans include The Coalition to Salute American Heroes and Operation First Response, both of which help with foreclosure and eviction situations while providing funding for basic necessities related to auto loan payments, food and utility bills. The American Legion also provides cash grants for veteran families requiring assistance with food, shelter and health expenses.

Is there credit card debt forgiveness for disabled veterans?

The Veterans Administration extended debt relief to veterans adversely impacted by COVID-19 through the end of 2020 and will not pursue collections on VA related debts. Meantime, the Trump administration, through the Total and Permanent Disability (TPD) Discharge automatically forgave student loan debt for over 25,000 disabled veterans. However, when it comes to credit card debt forgiveness, no such program exists for disabled veterans, and it becomes a matter of individual credit card issuers deciding whether to grant hardship debt relief to veterans who ask for it.

Military Debt Relief Programs

Military Debt Consolidation Loans (MDCLs) offer lower interest rates and closing costs than are charged in typical debt consolidation loans to ordinary civilians, along with a wide range of repayment terms often stretching for as long as thirty years. MDCLs also are a form of “cash out” loans, meaning that they are a form of refinancing that involves a greater loan amount than the current level of debt, resulting in the opportunity to utilize excess cash to pay off credit cards, medical bills and other forms of unsecured debt. Veteran debt consolidation offers several advantages over traditional debt consolidation, depending on the financial institution, with a lower credit score requirement and debt to income ratio standard commonly in place.

Where to get military debt relief?

There are a number of military debt relief programs available to those who have served our country and continue to do so. Veterans Affairs (VA) loans, make it easier for military members, veterans and their families to become homeowners, with the VA guaranteeing up to 25% of the loan amount while placing restrictions on what degree of fees banks can charge, making these loans more affordable. Importantly, when members of the military run into financial trouble, if they already have a VA home mortgage, they can leverage a VA loan to qualify for a Military Debt Consolidation Loan (MDCL) ranging up to the appraised value of their home.

Contact United Debt Settlement to learn more about military debt relief. Give us a call at (888-574-5454) or fill out our online contact form and get a free savings estimate.

About the Author: Steven Brachman

Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.