There are many reasons why veterans and currently serving military members might need to consider applying for a personal loan. The cost of permanent change of station moves is one–those moving from low-cost to high-cost areas may need more money up front for security deposits, storage fees, and other expenses.
In times when a personal loan is needed, some want to know how and where they can apply for a VA loan; after all, VA mortgage loans are offered from participating lenders who also provide personal loans, isn’t there a VA loan for someone who wants to consolidate debt, buy a vehicle, or invest in a college fund?
The short answer is no. VA loans are only for real estate. If it cannot be taxed or legally classified as real estate you cannot purchase it with a VA mortgage. That is why RVs, campers, houseboats, and other vehicles are ineligible for VA loans.
Without a VA personal loan option, what is available for those who need a military-friendly personal loan? There are a variety of choices starting with the servicemember’s own pay schedule, as we’ll explore below.
The paragraph above states clearly that VA loans are NOT available as personal loans. This is true. It is ALSO true that you cannot buy a home with a VA loan, apply for more money than you need to purchase and close the deal, and take the remainder in cash. This is not permitted.
But there IS a VA loan option that does provide cash back to the borrower; it’s just not a new purchase loan.
The VA Cash-Out Refinance loan program allows you to refinance a home you have made a minimum amount of payments on (ask your lender as VA loan minimums and lender standards may not always agree–the lender is free to require a higher number of payments). Any amount left after the original loan and closing costs have been paid goes back to the borrower in cash at closing time.
The VA Cash-Out Refinance loan can be used for a loan that is current or delinquent and can refinance both VA and non-VA mortgages alike. What’s the catch? The younger your home loan is, the fewer payments that were made means you won’t have as much equity built up over time. And that means less cash back at closing time.
For those who have longer payment histories, the cash you get back on the loan can be used for any purpose acceptable to the lender and that includes debt consolidation or other personal loan type uses.
Some financial institutions or credit repair blogs as a “VA personal loan” or imply that this is a VA debt consolidation program; technically it is not but the outcome e in any case–the borrower applies for a new loan and gets cash back to use for personal needs.
For those still in uniform, advance pay options are available in conjunction with your permanent change of station move. Advance pay is described as “A one time temporary loan authorized to cover the extraordinary cost of relocating to the overseas area. Amount authorized will not exceed three months of basic salary.”
Advance pay must be paid back via allotment; the repayments begin in the paycheck after the advance is paid to the servicemember. The repayment period cannot exceed 26 pay periods.
Here’s the best reason to consider advance pay–service members can request a minimum of one month’s pay and a maximum of less than three months’ pay and there is no interest charged for this advance. It is essentially an interest-free loan. Sadly this option is not open to those who are not currently serving.