Veteran & Military Loans with Bad Credit

Military members and veterans often struggle to make ends meet. That leads to bad credit scores, which makes them prime targets for predatory lenders.

The base pay for new military recruits is approximately $27,600 a year. That can make it hard to budget and build a good credit score.

Military members and veterans can improve their credit scores. Avoiding predatory lenders is a good place to start.

The Military Lending Act (MLA) and Servicemembers Civil Relief Act (SCRA)

Predatory lenders have a special place in their dark hearts for the military. Instead of helping financially vulnerable service members, they prey on them with high-risk loans and shady business practices.

The Military Lending Act (MLA) and Servicemembers Civil Relief Act (SCRA) provide some protection from predators. Congress passed the MLA in 2006, during the height of the Iraq War. At the time, 17% of military personnel were taking out payday loans.

“That was the peak of the call of reserve forces to active duty, but it also opened up the aperture for bad actors to prey on that population,” Jim Rice, assistant director of the office of servicemember affairs at the Consumer Financial Protection Bureau, told Dow Jones Newswires.

The Iraq War is long over, but payday loans are still going strong. Studies show about 20% of military personnel use them.

The SCRA helps with financial obligations service members incurred before joining the military. It limits interest rates on things like mortgages and car loans to 6% and prevents evictions without court orders.

The MLA deals with debts incurred while on active duty, capping interest rates on many loans at 36%. That’s still relatively high, but it’s a lot better than the 700% interest rate charged by some payday loan companies.

Personal Loan Options for Veterans & Military Members

The government doesn’t have any loan programs for active or retired military members who have bad credit. But if you’re in that group, private companies might be willing to give you a loan.

Among them are VA Financial, Armed Forces Bank, Navy Federal Credit Union, Omni Financial, First Command, Lending Point and Avant. Banks, credit unions, and online lenders abound.

Many of those lenders won’t touch a civilian applicant who has a credit score below 500. Some will loan money to service members with credit scores of 300, which is the lowest possible score.

Loans typically range from $1,000 to $50,000. Interest rates vary, but none are good if you have a bad credit score.

Credit Unions are limited to 18% interest rates on personal loans. The catch is you must be a member of the credit union and qualify for the loan. Interest rates at banks and other lending companies can approach 36% and have high fees.

That’s pricey, but at least high-risk service members will be considered for personal loans. It helps that, unlike many civilians, lenders know military applicants should have a steady income.

Frequently Asked Questions

Can Personal Loans Help Improve Credit?

Personal loans can improve credit scores if they are handled properly. That means making payments on time every month. Your credit score will start climbing if you do that, though there are potential complications.

If you have a bad credit score, you will be paying a higher interest rate. A bad credit score is in the 580-630 range. At the end of 2025, interest rates for those borrowers routinely exceeded 30%.

Even if you make every payment early, your credit score might go down early in the life of the loan.

Just applying for a loan triggers a “hard inquiry” and will lower the average age of your credit accounts. Both will cause temporary dips in your credit score.

Consider it taking one step back to take two forward. If you never miss a payment and make them all on time, a personal loan will boost your credit score over time.

Are There Loan Options for Current Military Members with Bad Credit?

Active-duty military members with bad credit have more loan protection than veterans. The MLA caps interest rates at 36%, but the law applies only to loans incurred while on active duty. Predatory lenders can still charge veterans astronomical interest rates.

Similarly, the SCRA caps interest rates at 6% on certain debts incurred before starting active duty. That protection is not available on debts incurred after military members have completed their service.

Some financial institutions and relief organizations also have loan programs that are available only to active-duty military members. One such program is Army Emergency Relief (AER), where military members who qualify can get $2,000 in immediate financial assistance.

How to Choose the Right Lender

The MLA and SCRA protect military members with bad credit, but the best way to avoid predatory lending is to protect yourself. That means educating yourself on loan programs and being skeptical of offers that seem too good to be true.

That skepticism should kick in when you see lenders hype “military loans.” That might sound like they’re offering deals not available to civilians. It might be just a guise that hooks you into loans with exorbitant interest rates, hidden fees, and brutal payment terms.

Be wary of prepayment penalties and balloon payments, which allow you to make a few small payments before facing a much larger one.

Also, geography matters. Payday lenders are often located near military base entrances. That doesn’t mean all those lenders are scam artists, but if they set up shop in a strip mall between a massage parlor and a palm reader, consider that a red flag.

And take advantage of the military’s services. Most bases have a financial readiness office, which offers free financial counseling for military members. It can also direct you to legitimate financial institutions.

It might be easier to get a loan from a predatory lender but that’s really just an easy way to get deeper into debt.