VA Debt Consolidation Loans for Veterans

By Bill Lyons | Published on June 26, 2023

If you are drowning in debt and barely making your minimum monthly payments, it may be time to consider a VA debt consolidation loan. When you have equity in your home, the VA loan process makes it possible for you to cash in on the equity in your home so that you can pay off debt, pay for emergency expenses, or even fund home repairs. Understand what your home is worth, and access the equity in your home when you are looking for VA debt management solutions.

VA debt consolidation loans are a great tool for veterans, active military members, and certain spouses to obtain cash when there is equity in a home. For those struggling with high amounts of monthly debt, getting high interest debt under control can help with financial stability.

VA debt consolidation loans are backed by the VA, which loosens the qualifications for borrowers. When you are just getting your financial health under control, this is an excellent loan to manage higher interest debt and improve your financial wellbeing.

What Is a VA Debt Consolidation Loan?

A VA debt consolidation loan—also known as a VA cash-out refinance—is a loan that is backed by the Department of Veterans Affairs. Taking out a debt consolidation loan for veterans allows borrowers to capitalize on their home’s equity and get cash payments from the lender.

Borrowers can use the money from a VA cash-out refinance to consolidate debts, cover emergency expenses, fund home improvement projects, and more. The process of getting a VA debt consolidation loan can take up to 30 days when you work with a reputable lender ready to process your application.

How Does a VA Cash-Out Refinance Work?

To get a VA cash-out refinance loan, you will submit an application to your lender. Your lender will consider multiple factors—such as the value of your home, the amount remaining on your mortgage, and your current financial standing—to determine how much money you’re eligible to receive and what your new mortgage terms will be.

Your VA cash-out refinance loan will replace your current mortgage. Once you agree to the terms of your VA debt consolidation loan, you’ll receive the money you were approved for and your new mortgage will go into effect. As far as the money you get from a VA cash-out refinance, you’re free to spend it on anything you’d like.

VA Debt Consolidation Loan Qualification Requirements

There are a number of debt consolidation loan requirements to consider when applying for a VA cash-out refinance. Although a VA cash-out refinance is considered to be a fairly flexible loan type, borrowers must still meet minimum eligibility requirements in order to take advantage of this option.

To qualify for a VA cash-out refinance, you must meet the following requirements:

• Obtain a Certificate of Eligibility (COE)
• The home attached to the loan must serve as your primary residence
• Your credit score must be 550 or higher
• You must demonstrate proof of income
• The home must undergo an appraisal and pest inspection

Benefits of VA Debt Consolidation Loans

There are several benefits to VA debt consolidation loans that make this type of loan a solid debt management tool to use. If your credit score has improved since you obtained your initial mortgage, you may qualify for a consolidation loan that offers you a better interest rate. This can reduce your monthly payment amount, and give you a better chance at paying off your overall debt. You can pull cashout up to 100% of the value of your property.

Additionally, once you secure a VA debt consolidation loan, you can use the cash for anything you want. You can invest in your home by making renovations or upgrades, pay down debt, use the money to pay off emergency expenses, or save it in your rainy day fund. It is up to you what you use the cash for when you obtain a VA debt consolidation loan.

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Drawbacks of VA Debt Consolidation Loans

One of the drawbacks of securing a VA debt consolidation loan occurs when your financial situation is worse than when you got your original mortgage. If you have a lower credit score, the mortgage loan is likely to be at a higher interest rate than when you got your first mortgage and will likely increase your monthly mortgage payment.

Another downside of taking out a VA cash-out refinance is that you’ll have to pay the VA funding fee. Assuming you’re not exempt from the VA funding fee, this means you’ll have to pay 2.15% of the loan amount if it’s your first use or 3.3% for a subsequent use. In addition to the VA funding fee, you’ll have to factor in other closing costs such as the appraisal and pest inspection fees.

When to Use a VA Debt Consolidation Loan

There are a number of reasons to use a VA debt consolidation loan. If you are getting behind on monthly bills, consolidating your outstanding debt can make a big impact on your financial health. When you are only making minimum payments, this can rack up a lot of interest charges. A debt consolidation loan can be a great option when it comes to paying off debts, whether these are credit card bills, other home loans, or emergency expenses like medical bills.

Additionally, if you have been hoping to update your home, build an addition, or renovate an existing space, a debt consolidation loan allows you to tap into your home’s equity and fund these projects. If you need repairs done on your home, a debt consolidation loan makes it easy to secure funding for a new roof, heating system, driveway, and so on.

How to Apply for a VA Debt Consolidation Loan

Applying for a VA loan is a process that can often be completed within 30 days. When you are looking for a VA debt consolidation loan, you can apply online or work with a loan officer from Griffin Funding to get the loan processed. You may need to provide tax returns, your COE, or W2s for proof of income and eligibility.

Once you submit an application and supply us with the necessary documentation, we will let you know if any further information is needed. Once you sign our completed loan documents, these are reviewed by a loan officer for you to receive funding. In most cases, we can complete your VA cash-out refinance in 30 days or less.

Tap Into VA Debt Management Resources and Get Cash

It’s easy to tap into the equity of your home when you apply for a VA debt consolidation loan through Griffin Funding. We make the process smooth and offer competitive loan terms and excellent customer service. Whether you want to pay down your debt or you are looking to update your home, the cash you secure from your debt management VA loan can be used for anything.

Reach out today to learn more about the VA cash-out refinance application process, VA loan rates, and the loan terms you qualify for. We also encourage you to check out the other financing products we offer or speak to one of our specialists to determine which loan type is right for you. Apply now.

Bill Lyons

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 22 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 10 years in business.