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  • Writer's pictureJames Heinz

Debt Consolidation for Veterans and Military Families for Financial Support

Being part of the military community brings with it a unique set of financial pressures. The financial landscape for military personnel and their families can be challenging from frequent relocations to unexpected deployments. 

It's not just about managing day-to-day expenses; it's also coping with the erratic nature of military life that can throw a budget off balance. 

For those in the military community, managing debt effectively is crucial. Debt consolidation can be a strategic approach to simplifying your financial obligations. Specifically, designed debt consolidation options for military personnel take into account the unique circumstances of service life. 

These options can offer lower interest rates or special terms not available to the general public. Understanding these tailored solutions can help you manage your debt more efficiently and secure a healthier financial future for you and your family. 

Understanding Military Debt Consolidation Loans (MDCLs)

Military Debt Consolidation Loans
Military Debt Consolidation Loans

Let’s learn about Military Debt Consolidation Loans (MDCLs), a specialized loan option curated for veterans and military families.  

1. What is a Military Debt Consolidation Loan (MDCL)?

A Military Debt Consolidation Loan (MDCL), also known as a VA Consolidation Loan, is a debt management program that helps active duty military and veterans manage their finances. MDCLs are similar to regular debt consolidation loans, but they are only available to those who have a VA loan on their home.

With an MDCL, you can refinance your current VA loan for more than the amount you owe and receive the difference in cash. For example, if you owe $75,000 on a house appraised at $100,000, you could take out a $100,000 loan and receive $25,000 in cash to pay off other debts.

2. Comparison with civilian loan


Civilian Debt Consolidation Loans

Military Debt Consolidation Loans (MDCLs)


Open to civilians 

Exclusive to active-duty service members, veterans, and some dependents

Interest rate

Typically based on credit score and financial history

Often lower interest rates, especially for active-duty service members

Application process

Standard application process

May have streamlined application process for service members



Potential benefits include: - Lower interest rates - Flexible repayment options - Financial counseling and support services

Repayment terms

Varies depending on lender

Flexible repayment terms tailored to military life and income stability

Additional assistance

Limited options specific to military

Various assistance programs and resources available through military support networks

Benefits and Risks of Military Debt Consolidation

Every loan available in the market, including military debt consolidation for veterans has its own set of benefits and risks. And before opting for one, it is very important for you to assess all of its pros and cons. So, let’s see the benefits and risks of military debt consolidation. 


  • Competitive Interest Rates: Military debt consolidation loans typically offer lower interest rates compared to other types of loans like payday loans, helping individuals save money on interest payments over time.

  • Simplified Monthly Payments: By consolidating multiple debts into one loan, individuals only have to make a single monthly payment, making it easier to manage their finances and stay on top of payments.

  • Improved Credit Score: Making timely payments on a consolidated loan can help improve credit scores, making it easier to qualify for future loan options and financial opportunities.

  • Flexible Debt Management: Military debt consolidation loans offer flexible payment terms, making it easier for individuals to budget and manage their monthly expenses effectively.

  • Access to More Funding: Consolidating debts into a single loan can increase purchasing power for other essential expenses and serve as a protective measure against financial emergencies.


  • Additional Costs: The search results indicate that applying for a military debt consolidation loan may involve additional fees, such as closing costs and annual fees. These extra costs can offset some of the benefits of debt consolidation.

  • No Debt Reduction: Unlike debt settlement, debt consolidation does not actually reduce the total amount owed. It simply combines multiple debts into a single loan, which may not address the underlying issue of excessive debt.

Eligibility and Qualification for Military Debt Consolidation

Before applying for military debt consolidation for veterans, you need to know the eligibility requirements.

Eligibility is primarily based on military service status:

  • The borrower must be a veteran or currently serving in the U.S. military.

  • Active duty service members and veterans are eligible, but the loans are specifically designed for military personnel.

Credit score and debt-to-income requirements are more lenient:

  • Qualifying standards for military debt consolidation loans are easier than for conventional consolidation loans.

  • Borrowers may have lower credit scores and higher debt-to-income ratios compared to civilian debt consolidation loans.

VA home loan requirement:

  • The borrower must already have a VA home loan to qualify for a military debt consolidation loan (also called a VA consolidation loan).

  • The consolidation loan is a "cash-out" refinance of the existing VA home loan, allowing the borrower to access equity to pay off other debts.

Here is a simple list of documents required for the loan:

  • Proof of military service

  • Identification documents

  • Proof of income

  • Credit reports

  • Details of existing debts

Options for Debt Consolidation for Veterans and Military Families

debt consolidation for veterans
debt consolidation for veterans

When it comes to considering debt consolidation for better finance management, there are multiple options available that are accessible to everyone, including veterans. These include personal loans, home equity loans, and balance transfer cards. 

Veterans and military families can also get debt consolidation via these loan options, but if you are a veteran, why should you choose a Military Debt Consolidation Loan (MDCL)? Here is a comparison between these loans so that you can make the best decision. 

1. Comparison 



Personal loans

Home equity loans

Balance transfer cards


Active duty military, veterans

Open to all borrowers

Requires home equity

Open to all borrowers

Credit requirements 

More lenient than civilian loans

Varies by lender, often 670+ credit score

Typically requires good credit

Typically requires good credit (670+)

Interest rate 

Competitive, often lower than other options

6-36% APR

Lower than personal loans

0% intro APR, then 15-21% APR

Loan amounts 

Varies by lender 

Up to $50,000+

Up to 85% of home value

Limited by credit card limit

Repayment terms 

Flexible, often longer than personal loans

1-7 years

5-30 years

15-21 months 0% intro period


May include closing costs, annual fees

May include origination fees

May include closing costs

May include balance transfer fees (3-5%)


Typically secured by VA home loan


Secured by home equity


2. Encouragement to compare interest rates and payment terms before choosing

Saving Those Hard-Earned Bucks: As veterans, we know the value of a dollar. That's why it's essential to compare interest rates. A lower rate means more money stays in your pocket instead of lining the lender's pockets. So, take the time to shop around and snag the best deal possible.

Finding Your Perfect Fit: Not all loans are created equal. Some have repayment terms that are as flexible as a yoga instructor, while others might lock you into a rigid schedule. By comparing payment terms, you can find the one that fits your financial situation like a glove. Whether you need lower monthly payments or a shorter repayment period, there's a loan out there for you.

Avoiding Financial Landmines: Choosing the wrong debt consolidation loan could land you in hot water. High interest rates or sneaky hidden fees could turn that financial lifeline into a sinking ship. By comparing options upfront, you can steer clear of those nasty surprises and keep your financial ship sailing smoothly.

So, fellow veterans, don't rush into choosing a debt consolidation loan. Take your time, compare those interest rates and payment terms, and make sure you're setting yourself up for financial success. 

Debt Consolidation and Financial Assistance Resources

Till now, we have learned about the loan options available for debt consolidation for veterans and military families. Now, let’s see which organizations are providing these loans for the veterans, what type of programs are available, and more. Let’s get into it. 

1. Organizations providing debt relief for military families

  • Service Relief Organizations: Army Emergency Relief, Navy-Marine Corps Relief Society, and Air Force Aid Society can provide emergency financial help in the form of interest-free loans, grants, or a combination of the two. They also offer financial preparedness counseling and tuition assistance.

  • Nonprofit Credit Counseling Organizations: Nonprofit credit counselors can provide debt relief guidance and support to struggling veterans, active-duty service members, and their families.

  • Military-Focused Financial Institutions: USAA and Navy Federal Credit Union cater specifically to veterans and active-duty military personnel and may offer debt consolidation loan options.

  • Military Debt Consolidation Loan (MDCL) Providers: Lenders that offer MDCLs, which are designed to help military borrowers consolidate multiple debts into a single loan with more favorable terms.

  • VA Consolidation Loan Providers: Lenders that offer VA consolidation loans, which allow veterans to refinance their existing VA home loan to pay off other debts.

2. Military Loan Repayment Assistance Programs

  • Army Loan Repayment Program (LRP): The Army offers a special incentive to highly qualified applicants entering the Army. Under the LRP, the Army will repay part of a Soldier's qualifying student loans. Only specified Military Occupational Specialties (MOSs) qualify for the LRP.

  • Student Loan Repayment Program (SLRP): This program is designed to repay Federal guaranteed student loans. Eligible Air Force Specialty Codes are listed annually, and enlisted members agree to participate in the Selected Reserve in exchange for education loan repayment to their designated lender.

  • Public Service Loan Forgiveness (PSLF): This program forgives all student loan debt after the borrower makes 120 qualifying payments while working full-time with the military or another qualifying non-profit.

  • National Guard Loan Repayment Program: The National Guard offers a general repayment amount of up to $50,000, with yearly limits. However, benefits can fluctuate based on funding issues.

  • Coast Guard Loan Repayment Program: The Coast Guard will repay up to $30,000 of student loans, with yearly limits.

3. Special considerations for debt consolidation and relief options unique to veterans and active-duty members

We have already learned about one of the most popular options for debt consolidation for veterans which is Military Debt Consolidation Loans (MDCLs). They are tailored specifically for veterans and active-duty military personnel. In addition to that, there are more considerations available for military families considering their special conditions. 

  • Lower Interest Rates: Military debt consolidation loans often offer more competitive interest rates compared to civilian loans, making them an attractive option for veterans and active-duty members looking to manage their debt more effectively. 

  • Easier Qualification: Qualifying for a military debt consolidation loan is typically easier than conventional consolidation loans, with lower credit scores and debt-to-income requirements. 

  • Guaranteed by the VA: Military debt consolidation loans are guaranteed by the VA, providing an added layer of security for lenders and potentially resulting in lower interest rates for borrowers. However, it's important to note that these loans turn unsecured debt into secured debt, with the home serving as collateral.


 In wrapping up, remember that you're not alone in this financial journey. There are a wealth of resources and experts ready to help you consolidate your debts. Don't hesitate to reach out and seek their guidance. While debt consolidation loans offer benefits like lower interest rates and simplified payments, it's crucial to weigh the risks, too.

Keep an eye on potential drawbacks like extended repayment terms and the temptation to fall back into bad spending habits. By managing debt wisely, military families can provide lasting financial stability, ensuring a brighter future for themselves and their loved ones.


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