Loans for Military Spouses with Bad Credit – Here’s Everything You Need to Know

Being a military spouse comes with many sacrifices, including frequent moves and separation from your spouse. Unfortunately, these challenges can also make it difficult to build good credit or recover from past credit mistakes. If you’re a military spouse struggling with bad credit, you still have options when you need to take out a personal loan. With the right lender and some smart planning, you can get approved and find reasonable rates, even with poor credit.

In this comprehensive guide, I’ll walk you through everything you need to know as a military spouse seeking a personal loan with bad credit I’ll explain

• Why it’s difficult for military spouses to build good credit
• What lenders look for when you apply with bad credit
• Tips for improving your chances of approval
• The best bad credit lenders for military spouses
• Alternatives beyond standard loans

Let’s get started!

Why Military Spouses Often Struggle with Bad Credit

There are a few key reasons why military spouses tend to have lower credit scores than the general population:

• Frequent moves – On average, military families move every 2-3 years. Each move can prevent you from building long and positive credit history.

• Separation from active duty spouse – Time apart from your active duty spouse can make managing finances and credit more challenging

• High-interest loans and credit cards – Some military spouses turn to high-interest financing like payday loans or credit cards when managing expenses solo. This can damage credit scores if debts balloon.

• Late payments and collections – The stress of military life can lead to late or missed payments that hurt your credit, especially during deployments. Old debts in collections also drag down scores.

• Little credit history – Young military spouses may not have enough credit history yet to have strong scores. Average age of credit accounts is 15% of your score.

• Job changes – Swapping jobs with each move can lead to income instability, making payments tougher.

What Lenders Look For When You Apply with Bad Credit

When you apply for a loan with bad credit as a military spouse, lenders will look for a few key factors to approve your application and determine your interest rate:

Credit score – Most lenders have a minimum score requirement. The higher your score, the better your chances and rates. Scores below 600 will be tough.

Income – Lenders want to see stable income that covers your debts. Paystubs or tax returns may be required as proof.

Debt-to-income ratio – Lenders calculate your DTI to ensure your total monthly debts are under a certain percentage of your income, often 50%.

Down payment – For large loans, a down payment reduces the lender’s risk. Even a small down payment can improve your chances with bad credit.

Collateral – For secured loans backed by collateral like cars or homes, the collateral value matters. More equity improves your chances.

Co-signer – Adding a creditworthy co-signer with good income may help you get approved and get lower rates.

Tips for Getting Approved for a Loan with Bad Credit as a Military Spouse

Though challenging, getting a loan with bad credit is possible if you take the right steps to improve your chances:

• Shop lenders that work with bad credit – Look for lenders like credit unions or online lenders that offer bad credit loan programs. Avoid major banks which are less likely to approve bad credit borrowers.

• Know your credit score – Get a free copy of your credit reports so you can understand why your score is low before applying. Knowing your score will allow you to set realistic expectations.

• Improve your credit first if needed – If your score is very low (below 580), take 6-12 months to improve it by paying down balances and disputing errors. This can significantly improve your approval odds and interest rates.

• Ask about prequalification – Find out if the lender allows prequalification first, so you can check your approval chances with a soft credit check that doesn’t hurt your score.

• Apply with a co-signer – Adding a co-signer with good credit and income makes approval much more likely and can mean lower interest rates. Just be sure they understand the responsibility they are taking on.

• Use collateral if possible – Loans backed by collateral (like auto title loans) are easier to get with bad credit since the collateral reduces the lender’s risk. Just be cautious borrowing against assets you need.

• Lower your debt-to-income ratio – Reduce monthly debts where possible so you stay under a 50% DTI, which is preferred by most lenders.

• Prepare documentation – Have paystubs, W-2s, and bank statements ready to prove your income. Letters explaining past credit issues also help.

The Best Bad Credit Lenders for Military Spouses

These lenders stand out for their bad credit borrowing programs and history of working with military families:

Navy Federal Credit Union

• Minimum credit score: None
• Loan amounts: $250 to $20,000
• Rates: 8.99% to 18% APR
• Loan uses: Personal expenses including debt consolidation

Navy Fed offers great personal loan options with no minimum credit score requirement. Their Financial Hardship program even forgives the first loan payment for eligible members.

USAA

• Minimum credit score: None
• Loan amounts: $2,500 to $20,000
• Rates: 10.34% to 18.51% APR with autopay discount
• Loan uses: Flexible personal expenses

USAA doesn’t disclose minimum scores but specializes in serving military members. Their flexible personal loans offer an autopay discount.

PenFed Credit Union

• Minimum credit score: Undisclosed
• Loan amounts: $600 to $20,000
• Rates: 9.99% to 17.99% APR
• Loan uses: Personal expenses

PenFed membership is free for all military spouses. They offer personal loans even for applicants with credit challenges.

LendingPoint

• Minimum credit score: 585
• Loan amounts: $2,000 to $36,500
• Rates: 15.49% to 35.99% APR
• Loan uses: Flexible personal expenses

Online lender LendingPoint offers higher loan maximums for bad credit borrowers than many competitors.

OneMain Financial

• Minimum credit score: None
• Loan amounts: $1,500 to $20,000
• Rates: 18.00% to 35.99% APR with discounts
• Loan uses: Flexible personal expenses

OneMain is willing to approve applicants despite credit challenges. They have over 1,500 branches nationwide.

Alternatives Beyond Standard Loans for Military Spouses

If you need immediate funds but think you may not qualify for a personal loan yet, here are a few quick financing options to consider:

Military relief societies – Organizations like Army Emergency Relief provide grants and 0% interest loans up to a few thousand dollars for emergency costs.

401k loan – You can borrow up to $50,000 from your 401k savings while paying interest back to yourself. Just beware early withdrawal penalties if you leave your job.

Credit card – A 0% intro APR card lets you pay zero interest if paid in full before the intro period ends.

Pawn shop – You can pawn an item of value in exchange for cash and buy it back later. Be aware of high fees.

Advance on paycheck – Apps like Earnin allow you to access earned wages before payday for a small fee rather than a loan.

The Bottom Line

Though having bad credit can be discouraging, military spouses should know they still have options to access financing if needed. Taking the time to understand what lenders look for, shopping military-friendly institutions, and taking steps to improve your credit profile can go a long way towards approval. With the right loan product, planning, and alternative solutions as a backup, you can overcome credit challenges and get the funds required to help your family.