Military members often struggle to meet their financial obligations, as indicated by the Military Family Financial Readiness Reports—a survey regularly shared by the Armed Forces Bank. This problem arises as the nature of their service, which includes frequent relocations, deployments, and potential changes in income, presents unique financial challenges for military families and veterans. Fortunately, many financial options, including emergency relief programs or debt relief loans for veterans, can help them through financial crises.
Veteran relief programs
Several government programs can help veterans manage their loans and repay them. Some of these relief options even forgive the veterans’ debts.
Military Debt Consolidation Loan (MDCL)
Homeowners who have previously taken a VA home loan (mortgage loan offered by the Department of Veterans Affairs or VA) are eligible for the MDCL. The MDCL is a mortgage refinancing loan that allows veterans to borrow money against their home equity. They can then use the loan proceeds to repay the debt. As part of this refinancing option, the borrowers must make a fixed monthly payout to the lender for a specified period. So, under this emergency relief loan provision, veterans no longer need to pay multiple creditors. Additionally, because the VA partially backs the MDCL, borrowers can benefit from improved loan terms.
USA Cares Veteran and Family Support System
USA Cares has several programs to assist military families and veterans who were impacted by 9/11. This military loan for veterans offers them assistance with transition, housing, advocacy, and finances.
Veterans of Foreign Wars Unmet Needs
This provision provides military loans for veterans and grants up to $2,500 to active-duty members and their families. It helps veterans and military personnel undergoing financial difficulties because of military-related incidents. It also helps those affected by deployment. In this case, Veterans of Foreign Wars Unmet Needs directly pays the creditors.
Credit counseling
It mainly helps veterans manage credit card debt. Here, certain organizations offer credit counseling services, helping veterans evaluate their debt and assess the best debt relief options.
Operation First Response
This organization offers VA loans to veterans with disabilities. These loans primarily assist families with disabled veterans and first responders, providing them with financial support to cover groceries, vehicle payments, utilities, and rent.
Operation Family Fund
This nonprofit organization provides financial grants to veterans and their families who have faced significant challenges. This assistance can help them adapt to new circumstances and achieve self-sufficiency.
Debt consolidation
It refers to clubbing several debts into a single, more manageable debt. Typically, the consolidated debt has a better loan rate. Veterans can find several debt consolidation options, such as balance transfer and consolidation loans.
Veterans can also qualify for an MDCL through a VA loan, using the amount to pay off various unsecured debts like personal loans and credit cards. Veterans typically enjoy lower interest rates compared to civilians, which can lead to significant savings over time. Not only that, but VA debt consolidation loans offer a host of advantages, including simpler qualifying standards, longer repayment terms, lower credit score requirements, and reduced debt-to-income ratios.
Short sale
When a veteran persuades the lender to sell their home for less than the mortgage amount, the lender receives compensation from the VA to cover this loss.
Loan modification
It occurs when the lender modifies the loan terms to prevent foreclosure. The delinquent payments are rolled into the new balance, and a new payment schedule is subsequently passed.
VA benefit debt options
Other debt-relief options relating to education benefits, non-service-connected pensions, and VA disability compensation are available for those with VA benefit debt.
Waiver
Veterans who cannot repay a debt can request a waiver from the VA. The VA may waive off a part or whole of the debt.
Compromise offer
If a veteran fails to repay the complete debt, they may seek a compromise offer. Under this, they can pay a one-time, smaller lump-sum amount instead of a full payment.
Temporary hardship suspension
Veterans who endure hardship or a natural disaster and desire financial assistance may request a temporary pause in debt collection.
Repayment plans
Sometimes, veterans might need more time to repay their debt. In that case, they can contact the Debt Management Center, which will draft a new repayment plan or modify the current one.
Other organizations that offer debt relief assistance include the Disabled American Veterans, Navy-Marine Corps Relief Society, The American Legion, Air Force Aid Society, Army Emergency Relief, and Military OneSource.
Other debt relief options for veterans
A few additional debt relief options are available for veterans. However, these should be considered a last resort, as veterans might incur extra penalties or increased interest to access these options. Some of these include considering debt settlement by a third-party debt settlement company, filing bankruptcy, looking into credit card debt forgiveness, and getting veteran-specific credit cards to transfer current balances to a new card.