01 Jun Car Loans for Veterans: What Are Your Options?
As a veteran searching for an auto loan, you might wonder – does the VA actually provide military veterans auto loans? While the market is full of credit unions and banks offering military discounts to qualifying veterans, it is safe to say that there is no such term as a veteran auto loan.
Simply put, the US Department of Veterans Affairs (VA) does not offer auto loans services to military members and veterans. Instead, the department provides assistance to get a loan.
Does the VA Provide Car Loans for Veterans?
The financial assistance offered by the VA is usually in the form of VA home loans. But in terms of auto loans, the VA does not currently have an auto loan product to offer. In this case, you would need to go through banks, credit unions, or dealer financing to get an auto loan.
However, there are cases under which the department is willing to offer you financial assistance to purchase a car.
For Disabled Veterans
If you have a service-connected disability that significantly impacts you, you might be able to qualify for VA auto loan allowance and adaptive equipment via vehicle grants for disabled veterans.
VA Auto Allowance
The VA automobile allowance is a grant available to veterans looking to purchase a car and have a severe disability. You must have a service-connected qualifying disability to qualify for this VA benefit.
You must meet one of the following conditions to qualify.
- Permanent loss of use or loss of one or both limbs
- Permanent loss of use or loss of one or both hands
- Severe burn injury
- Amyotrophic lateral sclerosis (ALS)
- Ankylosis in 1 or both knees or hips
- Permanent decrease of vision in both eyes
Under VA automobile allowances, you might be able to receive a one-time payment of up to $20,577.18. This money will be paid directly to the vehicle’s seller by the VA.
To apply, you must fill out VA form 21-4502 and submit your application to the regional VA office.
Adaptive Equipment Grants
Adaptive equipment grants allow you to alter the vehicle to fit your unique needs. To qualify for this benefit, you must be eligible for the VA automobile allowance and suffer from joint immobility in either a hip or knee.
You can update your vehicle with adaptive equipment grants by getting additional installments like power steering, lift equipment, brakes, seats, and windows.
Private Loans With Military Discounts
Though the VA does not offer auto loans, you can get generous discounts and crediting options from private sources like credit unions and military banks. However, note that most auto loans are secured loans, which means you would be using the car as collateral when you borrow the loan.
As a result, most auto loans generally have lower interest rates and fixed APR. The loan term usually ranges from 24 months to 84 months.
Before you borrow an auto loan, here are a few things you might want to consider.
- Make sure to compare the rates offered by different lenders
- Your credit score will play a vital part in determining the terms of the loan, so having a good credit score would mean better terms
- You can also ask the lenders for preapproval to get an estimate of how much you can afford
VA Car Loans From Banks
Several military and military-friendly banks offer military discounts to qualifying veterans, active military members, and family members.
Unlike a credit union, military banks are usually for-profit organizations willing to offer military perks like lower interest rates and flexible guidelines to their members.
Here is a brief on the top 4 military banks for auto loans.
Bank of America
With Bank of America, you can qualify for auto loan rates as low as 2.29% for a new car and 2.49% for a used car. However, rates will depend on where you live, so be sure to put in your state of residence to see the rate options for you.
Bank of America is the best option if you have a credit score ranging between 781 to 850. The bank offers flexible guidelines, low-interest rates and is available nationwide.
Moreover, if you want to buy the car directly from a private entity, the auto loan rates offered would start from 5.79%. The organization also provides refinancing auto loan options at a rate as low as 3.29%.
Rewards members can also receive interest rate discounts depending on their membership tier.
Armed Forces Bank
Armed Forces Bank has been offering financial assistance to service members and civilians since 1907. While the information for auto loans is limited on the website, the bank is known for its easy eligibility criteria and is available in all 50 states. You can also utilize some of its services while abroad.
Moreover, if you opt for automatic monthly payments, you can also qualify for a discount of 0.50% on interest rates for auto loans. The bank offers auto loans for cars, trucks, motorcycles, RVs, and boats.
USAA Federal Savings Bank
Based out of Texas, USAA Federal Savings Bank deals in banking, investment, loans, and insurance. The bank was founded in 1922 and offers financial assistance to military members, veterans, and family members.
USAA offers auto loans for new and used cars. The organization also provides refinancing options. The starting APR for new vehicles is 1.89% and 2.79% for used cars. You can also receive a 0.25% discount if you opt for automatic payments.
With a presence in all 50 states and Washington DC, Chase Bank is a viable option if you have an excellent or good credit score. Loan terms usually range from three to five years.
With an outstanding credit score, you can qualify for a new car loan at an interest rate starting from 4.19% and 4.34% for a used car loan. In the case of a good credit score, the interest rates for a new car would start around 4.89% and 5.44% for a used car.
VA Car Loans From Credit Unions
Credit unions are nonprofit organizations that offer investment options, personal loans, auto loans, and other services. However, unlike military banks, you must pass specific eligibility criteria to become a credit union member. Some credit unions are open specifically for military members, while others might be open to a broader range of people.
While opting for auto loans, it is recommended to get in touch with more than one credit union so that you can decide on the best interest rate. Moreover, because several credit unions offer different discounts and services, it is wise to do your research before getting an online quote.
Here are the top 4 credit unions offering the best discounts to qualifying veterans and active military members.
Pentagon Federal Credit Union
Penfed Credit Union offers competitive rates, especially if you are looking for a late model car. Besides this, the credit union is the second largest in the US and offers services in all 50 states and Washington DC.
APR for new car loans starts from 1.79% for a 36-month term, and the loan amount can range from $500 to $100,000. In the case of an old car loan, APR starts at 2.39% for a 36-month term.
Navy Federal Credit Union
If you are looking to purchase a new, used or classic car, getting an auto loan from Navy Federal Credit Union might be a wise choice. This credit union offers auto loans for cars, motorcycles, RVs, and boats.
If you opt for a 36-month loan term, the starting APR would be 2.49%. In the case of an 85-96 month loan term, APR would start at 6.29%.
Service Credit Union
With a guarantee to offer the lowest possible interest rate for auto loans, Service Credit Union offers auto loans with APR as low as 1.99%.
This credit union offers loans for used and new cars. You can also refinance an existing auto loan with Service CU.
Security Service Federal Credit Union
If you live anywhere in Colorado, Texas, or Utah, Security Service Federal Credit Union can be a great choice. This credit union offers competitive interest rates and flexible guidelines. However, to qualify for an auto loan, you must be a credit union member and meet their eligibility criteria.
It offers loan amounts ranging from $10,000 – $125,000 and loan terms of 7–84 months. The starting APR offered by Security Service Federal Credit Union is 3.44%.
Financing Through a Dealership
Also known as an indirect loan, dealer financing is an auto loan offered by a retailer to their customer, which is then sold to a bank or other financial institution. The bank then collects monthly payments from the buyer for the car.
The interest rate is what the financial institution quotes; however, these rates can generally be slightly higher than what is offered by banks and credit unions.
While these loans have higher interest rates, they are pretty easy to qualify for as they have lower credit score requirements.
Benefits of Using a Military Car Loan
While the VA does not specifically offer auto loans to military members, getting your auto loan through a financial institution that caters specifically to military members has its perks.
Some of these perks include:
- Lower Down Payment – Unlike traditional auto loans, car loans for military members typically have lower downpayment requirements to qualify. Just remember that a lower downpayment would also mean higher monthly installments.
- Lower Credit Score Requirements – Military car loans do not require you to have an outstanding credit score. While having a good credit score can be a plus point, it is not always mandatory.
- Easier Approvals – Military auto loans are relatively easy to apply for, have less stringent eligibility criteria, and come with easy and fast approval.
- Longer Loan Limits – You can also choose longer loan limits, which can gradually decrease the monthly installments but increase the interest rate.
Military Discounts on Cars
How to Choose the Right Car Loan
Make sure you check for all the grants, discounts, and other perks you might be able to get as a veteran or active service member. Also, make sure you check out banks and credit unions that specifically cater to military members and compare rates and terms so that you can find the best loan for you.