For veterans, securing an auto loan can be tricky, especially if you’ve got bad or no credit. While there’s no such thing as a veteran or military car loan, some credit unions and other private lenders will offer special financing terms or military discounts.

After returning from active service, buying a car is an important step in readjusting to civilian life. However, if you’re relying largely on a federal stipend or you were unable to build or maintain your credit while overseas, making a big purchase can seem daunting.

Fortunately, there are ways to reduce your purchase price, as well as various financing options! Military vets can get back out on the road, and

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How do car loans work?

A car loan is a type of

secured loan

that allows you to pay off the cost of a car over time. When you borrow money from a bank or other lender to buy a vehicle, you agree to pay back the total amount, plus interest, in monthly installments over a set loan term.

Secured means that your car acts as collateral for the debt. If you can’t keep up with payments, your lender can

repossess the vehicle

. But if you’re able to follow your payment schedule, you’ll be the full legal owner of your car by the end of the loan!

Because lenders take things like credit score and debt-to-income (DTI) ratios into account when processing loan applications, it can be challenging to get a car loan if your credit isn’t the best—but it’s not impossible!

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The best car insurance for military families and veterans

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What makes it hard to get a car loan as a vet?

As a military veteran, you may have some difficulties securing auto loans, especially if you were deployed overseas. Here’s why:

Your credit score counts for a lot, but building and maintaining credit can be difficult while on deployment. You’ll need a good credit score of 660 or higher to secure a conventional car loan with low interest—if you have low or no credit, lenders are less likely to approve your application, and your payments will be higher.

It’s difficult to get a car loan without steady employment, so if you’re still transitioning to civilian life or relying on a federal stipend, you may have trouble securing financing.

If you don’t have significant savings, you won’t be able to make a

large down payment

—which is one of the easiest ways to improve your approval odds and lower your monthly payment.

Despite these roadblocks, there are still ways to get into a new set of wheels. You may even be able to take advantage of your veteran status. Some car dealerships offer military discounts, which will lower your purchase price, and private lenders may offer special financing terms to vets.

Key Takeaway Low or no credit could make car shopping difficult, but private lenders may be willing to support military vets with special financing terms.

MORE:

Does financing a car affect insurance rates?

How to get a car loan as a vet

While it may be a challenge, getting a car loan as a veteran is not impossible. Here’s what you’ll need to do to secure financing and get the best rates:

Take stock of your credit and finances

Start by evaluating your finances, including your credit score. In general, you’ll get the best interest rates if you have a credit score of 661 or higher. Many lenders will approve individuals with a lower score, but you’re likely to get a high interest rate. If you’re below 500, finding a lender will be hard.

Calculate your debt-to-income (DTI) ratio by adding up all your monthly bills and dividing the total by your gross monthly income. Financers will use this number to gauge whether you’re able to afford a monthly loan payment. Typically, the ratio will be capped between 45% and 50%, meaning if taking on a car loan would use up more than half of your available income, a lender’s likely to turn you down.

Look for a lender that offers special financing for military vets

When trying to secure financing, you have several options, including banks, credit unions, dealerships, and online lenders. While most car shoppers secure loans from a bank, credit unions tend to have more flexible approval requirements, making securing a loan much easier.

Some credit unions even cater specifically to military personnel and may offer better loan options than traditional lenders.

PenFed

The Navy Federal Credit Union

, and

USAA

all cater to active-duty military, military retirees, and veterans.

Credit union offers may vary greatly, and different institutions have different requirements for membership, so it’s important to do thorough research.

Get pre-approved before you shop for cars

Regardless of your finances or which lender you choose, it’s a great idea to get preapproved before heading to the dealership. Preapproval lets you know exactly what amount your financing institution will loan you, which means you can shop smart and be sure to stay within your budget.

Consider a co-signer

If your credit or income makes it difficult to secure a loan at a low interest rate, you may benefit from taking on a co-signer. A co-signer for a car loan signs your loan with you, agreeing to take over the payments if you fall behind. While it could be a big favor to ask of a loved one, it’s one of the best ways to get approved for a loan if your credentials are below average.

Be prepared to wait for the best deal

While you may be eager to buy a car now, a bit of patience may be your best friend. If you lack extra cash, taking time to save up for a down payment could significantly lower your monthly payment. Similarly, building up your credit over time will very likely lower your interest rate.

It also pays to be a savvy shopper. Different dealerships will have different deals, so be sure to explore all of your options. Try your best to shop during peak times, such as year-end sales events, or at the end of the month when sales associates feel pressured to meet their goals.

Finally, look out for military discounts and rebates.

Ford

offers veterans a $500 cash bonus within 24 months of completing your service, and

Jeep

offers the same incentive within 12 months of your discharge date. If a car dealership doesn’t advertise a discount, that doesn’t mean you’re out of luck. Come prepared with your military ID and ask what your options are.

MORE:

Car loans for Ford 2022

Save on car insurance with Jerry

Once you secure a car loan, you’ll have to start shopping for car insurance. Regardless of your income or credit history, you’ll find jaw-dropping car insurance savings with

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FAQs

Can I get a car loan as a military vet?

If you have a steady income and a low debt-to-income ratio, you’re likely to get approved for a car loan, especially if you have strong credit or a co-signer. However, if you don’t have a regular source of income, you’re not likely to get a car loan.

Do car dealerships offer military discounts?

Certain manufacturers, such as Ford, Jeep, Acura, and General Motors, offer special discounts and rebates to military service members, retirees, and veterans who meet specific criteria. Dealerships may also offer their own discounts, though they won’t always be advertised. The best idea is to ask! Make sure to have your military ID on hand when shopping, and ask your salesperson what your options are.

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