Family drives away from car dealership with a new truck
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U.S. military members have an advantage when it comes to buying a car. Many lenders offer special military auto loans that work just like regular auto loans, but with better terms. If you’re serving in the military or have retired from service there’s a good chance you’ll qualify. Here’s what you need to know.

Auto loans: An Overview

Unlike personal loans, auto loans allow you to borrow money strictly for the purpose of buying a vehicle. Auto loans are secured loans, which means you borrow money at a fixed interest rate that won’t change over time. The vehicle serves as collateral for the loan, so if you fail to make payments it could be seized by your lender.

What’s better about military car loans?

Military car loans are better than conventional car loans in a several ways:

Easier to get approval. It’s not difficult to get a car loan even if you have a mixed credit history. If you have military credentials, however, it’s even easier. Military car loans are generally available even to service members with credit scores lower than the cutoff for regular car loans. What’s more, the approval process is usually faster.

Lower interest rates. Lenders usually offer reduced interest rates for military car loans, such as a discount of 0.25 percent to 0.50 percent off their standard rates. A lower rate could save you a great deal of money in interest payments over the length of the loan.

No prepayment penalty.  If you pay off a military car loan early your lender will not charge a prepayment penalty, such as the one might come with regular car loans.

Lower down payment. You can pay less money up front for military auto loans, with some programs offering no-money-down loans. That makes it easier to save up enough for a purchase, though paying less upfront means you’ll to pay more in interest over the long run.

Longer repayment period. Regular auto loans tend to have 36, 48 or 60 month terms, with shorter term loans offering lower interest rates. Military auto loans offer even longer options for repayment periods.

How to qualify for a military car loan

To get a military loan you need to provide proof that your military status qualifies you for the loan. If you are an active duty member of the military you can provide your active duty military identification card. You will also need to provide contact information, including a local address for the location where you are currently stationed. You may be asked for contact information for family members who can handle matters related to your loan if you are deployed overseas. Retired service members may be asked to provide proof of their military record, such as discharge papers.

Drawbacks of military car loans

The same risks that apply to all auto loans apply to military car loans—most importantly, the risk that you might not be able to make your installment payments. Defaulting on your loan could hurt your credit score and make it more difficult for you to borrow money in the future.

The ease with which military members can get a car loan makes it even more important to be cautious and think through the purchase. Your loan may be less costly because of your military status, but the other costs of owning a car—maintenance, insurance, parking fees and fuel—aren’t likely to be cheaper.