Although there are no official government car loans, it is very simple to get a car loan while in the military. The loan process is the same as it would be no matter what job you have. Lenders are going to look at your credit score, gross income, debt-to-income ratio, etc.
Military Auto Lending Criteria
When determining the merits of a loan application, lenders look at a set of criteria which includes:
- Loan to value (LTV)…between 85 and 115 percent.
- Age of vehicle…less than 8 years old.
- Term of loan…36 to 72 months.
- Miles on vehicle…under 100,000
- Down payment…at least 10 percent or $1,000.
- Time on job…two years.
- Time at residence…again, two years.
- Monthly income before taxes…depends on lender, usually $1,450 minimum.
- Credit score/profile…540 or above. Should have four paid as agreed lines of credit, one being an installment loan with twelve on-time payments of $150 or more.
- Total debt to income (DTI) including new payment…most lenders look for less than 36 percent, but some specialty lenders may stretch that to 45 percent.
Special Considerations for Military Personnel
When you are in the military, lenders may suspend the need to be on your job for two years because they know how long you are going to be on your current job (your enlistment duration). They will also overlook your time at residence for the same reason, they know exactly how long you are going to be in the military. Your DTI should meet their requirements, especially if you are living in the barracks. Lenders have also been known to overlook a poor credit score because they know that the government will honor all requests for wage garnishments; therefore, they are going to get paid if you default. Along with the special considerations that many lenders have when looking at your application, some offer special low interest rates to active duty military personnel and retirees. A few automakers do the same through their ”in-house” finance wings.
Where to Secure a Military Auto Loan
You have a number of choices when financing a car as a member of the military.
- Military Bank or Credit Union
- Dealership, including Captive Dealer Finance
- Buy Here Pay Here Dealer
The first two options are best. Many military-oriented banks and credit unions like USAA and Navy FCU offer great rates for members. However, you must go through the membership process first. Even if you are a member of one of these institutions, you’ll want to compare the APR they offer you to that which the dealer F&I (Finance and Insurance) person can offer you. Many automakers offer special incentives for military personnel and veterans, which could involve a cash-back rebate, purchase price discount, or interest rate savings. If at all possible, avoid BHPH dealerships, which are notorious for ripping off military personnel, particularly junior enlisted soldiers, seamen, and airmen.