Rateworks auto loan refinance
May 15, 2024

Beginner’s Guide to Military Auto Loans

How do I apply for a military auto loan?
Written by

Jennifer Moore

Before we discuss the military auto loans available to military service members, we’d like to pause and reflect. First, if you are a military member or a veteran who has since retired from service, we commend you and thank you for your service to our country. We appreciate the sacrifices you make each and every day to keep our families and friends safe. Thank you for your service today and every day.

As a military member, you might not know that certain loan programs are just for you because of your dedication to the armed forces. Aside from benefits like housing and college tuition assistance, military auto loans offer an affordable alternative to traditional auto loans. These specialized loans provide favorable terms that could significantly influence your refinancing decisions. In this article, we’ll share what to know about them and how they might benefit you.

What types of military auto loans are there?

Basics of Military Auto Loans 

Taking out a loan today isn’t always cheap. Often, we need all the help we can get to secure the lowest rate possible. This means doing our homework to find the best rates and payment terms that will make getting the loan a bit easier to bite off. 

That’s why it is so important for service members to know that special programs may be designed just for them. Whether it is a loan for a new car or refinancing a car you already have, special programs exist just for you. Thanks to various laws and regulations, military personnel enjoy special protections when securing auto loans unavailable to the general public. 

These laws are designed to protect the financial interests of those who serve our country. Let’s look at some of the basics of military loans and what you may expect from military lenders

Special Discounts and Privileges

Many lenders recognize the sacrifices made by military personnel and, as a result, offer special discounts and privileges exclusive to them. This can include lower interest rates and fees. 

While interest rates often depend on your credit score, military members might secure a discount ranging from 0.25 to 0.50% off standard rates offered. This discount can lower the total cost of owning a vehicle. For example, on a $30,000 auto loan with an interest rate of 9.56%, the monthly payment would typically be around $630.94. However, with a military discount of 0.50%, reducing the rate to 9.06%, the monthly payment drops to about $623.62. This discount can save you approximately $438.67 in total over the course of a 60-month loan.

Different Repayment Structures

Many lenders offer unique repayment structures for military members and their families. This might mean a lower down payment or no down payment at all. Also, payback schedules may be flexible, especially for those facing deployment or trying to ease back into work after returning from active duty.

Lower Loan Requirements

Military personnel often face less stringent loan requirements than civilian borrowers. This flexibility can be helpful for younger service members or those who might not have had the opportunity to build substantial credit histories. After all, deployments and time at basic training often mean little time to use credit to develop that credit score.

Lower loan requirements mean more military members can qualify for loans, even if their credit is less than perfect.

Check with Your Lender

It is always advisable for service members to discuss their specific circumstances with their lenders. Many military lenders are familiar with the challenges faced by military families and can offer advice and solutions that align with their needs.

Specialized Credit Unions

For those in the military community looking for lenders who understand their unique situations, specialized credit unions such as USAA and Navy Federal Credit Union are excellent options. These institutions are well-versed in the lives and needs of military members. They are well-known for offering competitive auto loans and comprehensive financial services designed with the military lifestyle in mind.

What are the qualifications needed for military auto loans?

How Military Auto Loans Can Differ From Traditional Auto Loans 

When it comes to an auto loan, there are some things you absolutely need to pay attention to, regardless of where the loan is coming from. For example, you need to be on top of the following:

  • Interest Rates: Always be aware of the interest rate as it directly affects your monthly payment amount. Lower rates mean lower overall costs, so get a good rate.
  • Loan Duration: The length of your loan will impact the amount of interest you pay over time. Shorter loans generally have higher monthly payments but accrue less interest, whereas longer loans spread out the payments but increase the total interest paid.
  • Monthly Payments: Before you sign any loan agreement, make sure that the monthly payments are manageable within your budget. Be aware that lower payments might extend the duration of your loan and increase the total interest.
  • Penalties: Be informed about any penalties for late payments, early pay-offs, or other deviations from your loan terms. Knowing these can help avoid unnecessary expenses.
  • Early Payoff Options: Some loans allow for early payoff, which can save on interest payments. However, check if there are any penalties for early payoff, as some lenders charge a fee to compensate for the lost interest.

That said, here is how military loans stand apart from the rest and why it is important to shop around and do your homework.

Some Car Manufacturers Offer Discounts to Military Members That Lower the Overall Cost of the Loan

Many car manufacturers recognize the service of military members by offering exclusive discounts. These discounts can significantly reduce the purchase price of the vehicle, thereby lowering the overall cost of the loan. By reducing the principal amount, military personnel can enjoy smaller monthly payments and less interest over the life of the loan.

Less Restrictive Terms and Conditions from Some Lenders

Military auto loans often have less restrictive terms and conditions than traditional loans. Lenders may provide more lenient requirements for credit scores and debt-to-income ratios, making it easier for military members to qualify for financing and secure better loan terms.

Approval Requirements or Repayment Periods May Be More Flexible

Recognizing the unique financial circumstances of military lifestyles, such as frequent relocations and deployments, lenders may offer more flexible approval requirements and repayment periods. This flexibility helps military members obtain financing that fits their transient life circumstances. They may even be able to defer payments when on active duty.

Some Penalties or Fees May Be Waived Depending on the Lender

Military members may benefit from waived penalties or fees typically applied to other borrowers. These can include late payment fees, prepayment penalties, or processing fees. Waiving these fees can have a big (and positive) impact on the overall cost of owning a vehicle. And, it can provide some peace of mind for military members serving on active duty.

Better Terms for Auto Refinancing from Some Lenders

Military personnel looking to refinance their auto loans might find that some lenders offer better terms, such as reduced interest rates or extended repayment periods. These improved terms can reduce monthly payments, lower the interest paid, or provide substantial financial relief.

Secure Better Auto Refinancing Terms with RateWorks

At RateWorks, we’re happy to offer lower rates and better terms for military members. Get started today by getting a free quote. See how much you can save by refinancing your car or truck with RateWorks.