Military Loans Information

Generally speaking, loans are a type of debt.  Anything can be lent; but for the purposes of this website, we are focusing exclusively on monetary loans--specifically military loans.  A loan is primarily defined by the distribution of monetary assets over a period of time with regards to the borrower and the lender.

The Military Loans Borrower

A borrower will initially receive some money from the lender, which they will pay back.  Usually this will be in the form of regular installments to the lender, however it does not have to work this way (if other arrangements are made).  These services are almost always provided at a cost to the borrower, commonly referred to as interest.  In addition, the terms of the loan typically subjects borrowers to certain restrictions or loan covenants (defined in the contract).  Military loans are special because they typically provide both the borrower and/or the lender some sort of protection during the loan process.  For the borrower, this could mean lower interests rates (i.e. federally regulated), less restrictive loan covenants, or preferential treatment for qualification.

The Military Loans Lender
 

A loan provider, or lender, is primarily the responsibility of financial institutions.  However, other institutions can issue debt contracts or bonds as a source of funding.  Military loans lenders typically work with military members for a number of reasons.  The most obvious reason is that military members have a steady, predictable, and secure source of income (again, federally regulated).  They not only have a better idea of the borrower’s ability to pay back the loan, but in some cases a third party will actually guarantee the loan (such as a Veterans Affairs Home Loan or VA Home Loan).

Other Military Loans
 

The above scenarios describe military loans as loans which are specifically tailored for military members.  Usually these loans are not available to non-military members or non-government employees (in some cases family members may qualify).  However, there are many other types of loans that are associated with military loans purely because of their popularity among military members.  A good example of this would be payday loans.  These loans are not true military loans since they are available to anyone and do not provide the borrower with any specific advantage or protection.

The Military Loans Process
 

Legally speaking, any loan is a contract or promise of a borrower to pay a specific amount of money (including interest over the period of the loan) for the promise of a lendor to provide another specific amount of money (the amount the borrower asks for).  Loans are usually categorized as either "secured" or "unsecured".  A secured loan (the most common type of loan) is given when the borrower pledges an asset (such as a home or a car) as collateral in order to receive the loan.  On the other hand, an unsecured loan (less common) is not secured against any specific asset, which makes them more dangerous for the lender and therefore less popular and harder to find (often with a higher interest rate, too).  For secured loans, the collateral used in securing the loan is often times the same item that the loan is being used to purchase (i.e. a new car or home).  This is the most common type of military loan because people are generally seeking money from a loan when they want to buy something specific.

When considering what type of loan to pursue, you need to look at several factors before making a decision.  The most obvious is interest, "How much more money do I have to pay, above the original ammount borrowed?"  Most people stop there (and many lenders lead you to believe that this is the only expense), however, often times there are many other costs associated with borrowing money.  These may be: loan origination fees, credit check fees, loan processing fees, etc.  There may also be extra charges or penalties for early pay-off (paying the remaining loan balance before the loan is due), address changes, payment processing, etc.  For these reasons, it is not only important to understand the specifics of a loan before you borrow money, but understand what other options are available.  At Military Loans Info, we'll try and get you started with finding this information, and help you with understanding what it means.  If you have any questions, feel free to ask us in one of our forums!
 

This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Loan".