USAA Home Equity Loan April 2024

Does USAA Offer Home Equity Loans or HELOCs?

USAA does not currently offer home equity loans or HELOCs.  However, since the pandemic began, product line-ups in the mortgage industry have been highly changeable, and offerings are subject to change again at any time.

USAA does provide two alternatives to home equity loans and HELOCs that might be useful in some situations. They are personal loans and cash-out refinancing.

Who is USAA?

USAA is a family of companies that provide financial services to people associated with all branches of the United States military. These services include bank accounts, mortgages, personal loans, and vehicle loans. 

Services are provided exclusively to members of USAA. USAA membership is limited to active or retired service members and their families, students enrolled in one of the armed forces academies, or anyone receiving formal military training. 

Becoming a USAA member does not cost anything and allows the member to sign up for USAA products and services.

The USAA has been in business since 1922 and is headquartered in San Antonio, Texas. It has offices in seven states but operates across the US through its online portals. It also has offices in England, Germany, and Luxembourg.

USAA offers services to 13 million members through a team of 36 thousand employees. USAA offers conventional and VA mortgages and refinance loans for homeowners and buyers. 

USAA Alternatives to Home Equity Loans or HELOCs

Though USAA does not currently offer home equity loans, it does offer personal loans of up to $100,000. This may be a viable alternative to a home equity loan or home equity line of credit (HELOC) if the borrower has a strong credit history.

Cash-out refinancing means refinancing the remaining balance of a mortgage with a larger loan and taking the difference in cash. This can be helpful when the homeowner can refinance to a lower interest rate. However, borrowers should compare the total cost of a cash-out refinance with the cost of refinancing the loan and adding a home equity loan to get the cash. 

Most cash-out refinances have surcharges that apply to the entire loan balance, not just the extra cash. So if a borrower refinances a $300,000 loan and adds $20,000 of cash-out, and the surcharge is 2% and applies to the entire balance, the upfront cost to get that money is $6,400 (32% of the cash taken). But suppose the borrower has a $100,000 mortgage balance and borrows an extra $100,000, and the surcharge is .5%. The cost to borrow is more reasonable at $1,000 (1% of the cash taken). For many homeowners, cash-out refinancing is not the cheapest way to borrow.

USAA personal loans in place of home equity loans

Personal loans might be a viable alternative for borrowers with excellent credit and who do not have substantial equity in a home. Because of loan origination fees, this alternative is likely to be more cost-effective for larger loan amounts.

Personal loans are secured or unsecured. A secured personal loan is backed by collateral, which is an asset the borrower owns and pledges as security for the loan. If the borrower fails to repay, the lender can repossess and sell the asset. 

An unsecured personal loan does not require collateral. The lender must rely on the borrower’s promise to repay the loan, which is demonstrated by his or her credit history. Secured loans are safer for lenders and usually have lower interest rates than unsecured loans. 

Even secured personal loans usually come with higher interest rates than home equity loans because homes are the most solid form of collateral. However, according to data from the Federal Reserve, personal loan interest rates are significantly lower than those of credit cards. And some providers offer their most qualified clients rates that are competitive with home equity loans. 

Interest rates and loan limits on USAA personal loans are subject to change at any time and depend on the borrower’s credit history and financial situation. As a general guide, here are some details as of this writing:

• Minimum loan amount: $2,500
• Maximum loan amount: $100,000
• Interest rate range: 6.49% to 18.51%
• Repayment term length: 12 to 84 months
  • 36 month maximum for loans less than $5,000
  • 48 month maximum for loans less than $10,000
  • 60 month maximum for loans less than $15,000
  • 72 month maximum for loans less than $20,000
• Discounts available for automatic loan repayment

USAA cash-out refinancing

USAA offers cash-out refinancing, but it might not make sense for those who want to borrow smaller loan amounts. That is because the VA adds a 3.6% funding fee to the refinance loan balance, and that fee applies to the entire loan amount, not just the cash-out. It might be a good option if you need a lot of money because the VA allows cash-out refinancing up to 100% (although lenders often draw the line at 90%). 

Advantages of Home Equity Loans and HELOCs

Since USAA does not offer HELOCs, their personal loans or cash-out refinancing might be good alternatives to opening a line of credit.

The advantage of HELOCs is their flexibility – that borrowers can tap the credit line and pay interest only on what they use. However, personal loans and cash-out refinancing deliver lump sums at closing. Borrowers immediately begin paying interest on the entire loan balance.

Cash-out refinancing may work for borrowers with relatively small mortgage balances who need a lot of cash. Homeowners should compare the cost of a cash-out refinance with that of a standard refinance combined with a HELOC or personal loan.

Personal loans can have interest rates that compete with HELOC rates if the borrower is exceptionally well-qualified. 

Details on USAA’s personal loans are listed in the previous section of this review.

How to Apply for USAA Home Equity Loans

As noted above, since USAA does not offer home equity loans, a personal loan or cash-out refinance might be a viable alternative for some borrowers. 

A potential borrower must be a USAA member to apply for one of their personal loans or mortgages.

USAA offers online personal loan applications with no fee for applying.

If the application is approved, USAA will show the borrower an interest rate offer right away. If the applicant decides to go ahead with the loan, money may be available as soon as 24 hours after approval. 

In general, loan applicants should expect to provide their income and employment history. They will list their financial obligations like rent, other loan payments, etc. This is to help the lender determine whether applicants can afford to repay the new loan. 

Homeowners apply for a cash-out refinance as they would with any mortgage product and incur closing costs, appraisal fees, and lender charges in addition to the VA funding fee. 

USAA will pull a credit report before approving a loan. Before applying, consumers should check that report themselves to see if mistakes need to be corrected or if they must improve their credit score before applying. A better credit score increases an applicant’s chances of approval and may also garner a better interest rate.

Note that when a lender pulls a credit report, it creates a “hard inquiry.” Too many hard inquiries within a short period can hurt a person’s credit score. So, it’s wise to do some shopping around and narrow down the field of potential lenders before starting to fill out applications. 

USAA Expert and Consumer Ratings

The 2021 JD Power U.S. Consumer Lending Satisfaction Study gave USAA a higher score for personal loans than any of the eight other firms rated.

In addition, Bills.com compiled data from 10 different expert and consumer information sites and averaged the ratings for USAA on those sites. Consumer ratings for USAA were only available on four of the ten sites. Where possible, ratings of USAA’s personal loans were used; if those weren’t available, ratings for USAA overall were used.

Based on this analysis, USAA earned an average score of 2.8 out of 5 stars.

Note that this rating is based on consumer opinions and is not a scientific measurement of a firm’s capabilities.

USAA Pros

• Personal loans available for up to $100,000
• Online applications speed up the process
• Automatic payment option offers both convenience and a discount on loan rates

USAA Cons

• USAA does not offer HELOCs or home equity loans
• Products and services are available only to USAA members
• Some customers have complained about poor service when problems arise
• Average of expert and consumer ratings is mediocre

USAA Alternatives

Interested in other alternatives? Since USAA does not offer home equity loans, homeowners with a substantial amount of home equity may find it worth considering alternatives. Other lenders offer home equity products that might be better for some situations. Remember to compare programs and pricing to get a good deal.