In this time of economic instability, it becomes more important than ever to have an emergency fund as well as cash on hand. It used to be that the amount of money you should have in your emergency fund should be equivalent to three months of your salary. However, since it usually takes longer than three months to get a job, the ideal amount would be at least six months worth. Some even put away about a year’s worth of their salary, tucked away in a stable institution or an interest-earning account. It should be remembered that an emergency fund should be easily accessible, so it’s important to think carefully as to where you should put it.
However, almost everyone has a financial emergency, where extra cash is needed for an unexpected bill. Whether you need money to pay for utility bills, long-overdue credit card bills or if you suddenly find yourself short on cash, a short-term loan may be the answer to your financial woes. And because credit companies are stricter now when it comes to loaning to consumers, an avenue that can be pursued by non-civilians are military loans.
There are different qualifying factors for a military loan, depending on which organization you’re borrowing from. Some qualify a military personnel for a loan who have a GS-6 or higher designation, have retired from the military after at least 20 years of service and or someone who’s either on active duty or working full-time as a reserve. Other military lenders may also require that the borrower doesn’t have any current bankruptcy proceedings.
Military loan payments are automatically deducted from the borrower’s paychecks, with the amount pre-determined by several factors, so there’s no risk of forgetting payments or due dates. And because military personnel have steady income, the risk of non-payment is also minimized. Traditional lending institutions protect themselves from non-paying borrowers or late payments, so they impose security measures, such as high and increasing interest rates, late fees and processing fees. These factors, however, make it difficult for other serious borrowers.
As non-civilians have the option of taking military loans, both lender and borrower are spared from having to undertake and undergo these procedures as there is no risk of delinquent payments since they are automatically deducted from the borrower’s paycheck. Hence, interest rates on military loans are reasonably lower. Military loans have shorter terms compared to regular loans, and because of the shorter payment term, borrowers don’t end up paying more than 100% of the principal loan amount due to the compounded interest over the years.
Given the current condition of the economy, it’s good to know that individuals who have been or are currently in service have the option of taking military loans to somehow address their money problems, without digging a bigger financial hole.