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Personal Finance

VA & Military Personal Loans: What Can They Be Used For?


Whether you’re making a big purchase, such as a new car, or need extra cash to cover expenses, taking out a personal loan can help ease your financial burden. Your choice of personal loans will be impacted by a number of factors, including the loan amount, your credit score, your collateral, and how much time you need to repay the loan.

What can a personal loan be used for?

In most cases, a personal loan can be used for whatever you need. You may want to renovate your home, buy a boat, pay hospital bills, or even take your dream vacation. However, depending on the type of loan you apply for — such as a consolidation loan or a hardship loan — you may only be able to use the money in specific ways.

Does the VA offer personal loans?

VA Loans are for real estate and must be used as a mortgage loan. They cannot be used for alternative dwellings such as RVs, houseboats, campers, etc., even if they are going to be used as a home. You also cannot take out a loan for more than the cost of the home with plans to use the extra money for home renovations or other expenses.

In addition to VA-backed home loans, there are a variety of personal loan options for members of the military that can be used for other purchases, including:

VA Cash-Out Refinance

The VA Cash-Out Refinance loan lets you refinance your home if you’ve made at least a minimum number of payments as required either by the VA or your lender. If there’s any money left after the original loan and closing costs are paid, the money goes back to the borrower as cash. The loan can be used for both VA mortgage and non-VA mortgages. The longer you’ve had your mortgage, the more cash you’ll receive. Depending on your financial institution, this loan program is referred to as a “VA personal loan” or a debt consolidation program, which is not technically accurate, but it works similarly in that you get cash back when you refinance.

Military Pay Advances

Military pay advances are an option if you are in the middle of a Permanent Change of Station (PCS) move. The military describes advance pay as “a one-time temporary loan authorized to cover the extraordinary cost of relocating to the overseas area.” You must request a minimum of one month’s pay and a maximum of less than three month’s pay. There is no interest on the advance. With military advance pay, you must pay it back in installments beginning the paycheck after the advance is paid, and the loan must be repaid within 26 pay periods.

Life Insurance Loans

Life insurance loans may be taken out of a permanent life insurance policy’s cash value. Part of a permanent life insurance policy’s premium goes towards paying for life insurance, and another portion goes into a type of tax-deferred savings plan that builds cash value. You can borrow against your policy any time, for anything you want, as long as you’ve built enough cash value on the policy. The longer you have the policy, the more cash value you can borrow. With a permanent life insurance loan, there is no credit check required and interest rates are typically lower than those of a bank loan.

Military Financial Relief Organizations

For military families who have unexpected expenses or family emergencies, there are organizations that may be able to help with emergency relief in the form of a loan or grant. Each of these relief programs have their own qualification requirements.

What Is AAFMAA’s CAP Loan for Servicemembers?

AAFMAA exclusively serves the military community and, as such, we offer special products designed with servicemembers in mind. The Career Assistance Plan (CAP) Loan for Active Duty, National Guard, or Reserve servicemembers is a $5,000, 60-month loan at a 1.5% APR with no fees, extra charges, or prepayment penalties. The loan proceeds are provided through a checking account at Armed Forces Bank. You must be an AAFMAA Member in good standing with a term life insurance policy of at least $250,000, or $50,000 of Value-Added Whole Life Insurance.

As the longest-standing, non-profit financial solutions provider supporting military families and Veterans, AAFMAA can help you with all your financial solutions, from mortgage loans, to life insurance, to our unique CAP personal loan. Call 1-888-851-2493 to learn more about military personal loans or visit our CAP Loan FAQ page for more information.