Military Car Loans: Disadvantages

Obtaining military car loans provides a way for service members in the armed forces to finance the purchase of a new or used vehicle. These loans may be offered at more favorable rates than traditional auto loans and not require the same credit or collateral that civilians must have. Military car loans take into account the value of the individual's military service and reward the risks these men and women are willing to take to protect the country.

Applying for a military car loan has many advantages for service men and women of the Army, Navy, Air Force and Marine Corps. There are also some disadvantages to these types of loans that must be considered as well before applying. Understanding what they may be will help a service member or their family be informed and make a good decision about applying for a military car loan.

Any type of lender, such as a bank, finance company or military credit union association, can make military car loans. The availability of these loans may however be restricted to certain levels of service or to certain types of duty. For example, it may only be the service member himself or herself that can apply for the loan as opposed to a relative or guardian on behalf of the member.

Given a service member stationed in some overseas duty, it may not be practical to make an application at the time the loan is needed.

Members of the military with low, poor or bad credit may be subject to rates that are as high or higher, than traditional loan rates. This is due in part to the fact that military car loans are secured by the service member's military affiliation and not by collateral. A poor financial history and inability to increase earning power as rapidly as a civilian can place some limitations on obtaining a good borrowing rate.

The credit requirements may also require a co-signer or some form of collateral to securitize the loan. This is not an uncommon practice with some lenders, so it is important to understand that the lack of a good credit profile may limit somewhat the car buying choices of the military service member.

A family member with a good credit and financial history can secure a traditional car loan that may be less expensive than a military car loan. It is a good idea to compare the terms of a military car loan to that of a traditional loan to determine which type offers the best rate to the service member.