Military Lending Act – Payday Loan Alternatives for Armed Forces Personnel After October 1st, 2007
The Military Lending Act takes effect today. By capping loans at 36 percent APR, the act is a de facto ban on payday loans to members of the armed forces.
What are the emergency loan options for military personnel after October 1st, 2007?
The best option is to avoid taking a loan in the first place. One way to do this is to negotiate a payment plan with creditors. A good way to avoid future loans is to start working on your Rainy-Day Fund as soon as possible.
Interest free emergency loans are the second best option. Our article entitled Interest Free Loans for Military Personnel lists five organizations that help the men and women in our armed forces overcome financial emergencies:
- American Red Cross Emergency Financial Assistance for Military Members and Families (External Link)
- Air Force Aid Society – Official Charity of the U.S. Air Force (External Link)
- Army Emergency Relief (External Link)
- Coast Guard Mutual Assistance (External Link)
- Navy-Marine Corps Relief Society (External Link)
For a more detailed look at the above sites, please read Financial Resources for Military Personnel.
If your cash need is a one-time, unexpected emergency that requires $350 or less, Modest Needs is an excellent option. The money provided by Modest Needs is a grant, not a loan, so you don’t have to pay it back.
Credit unions are another safe and inexpensive alternative to payday loans. Many credit unions offer payday loan alternatives to military members at a fraction of the price. These credit unions include:
- Fort Bragg Federal Credit Union (External Link)
- Pentagon Federal Credit Union (External Link)
- Navy Federal Credit Union (External Link)
- Arkansas Federal Credit Union (External Link)
- Armed Forces Bank (External Link)
The United Services Automobile Association (USAA) Savings Bank offers military personnel and their families low-cost credit cards:
A less favorable option is a personal loan from family or friends. Although this alternative may be cheaper, it is never easy and carries substantial risks to your relationships. If you do decide to explore this option, please read Family and Friends to help you avoid pitfalls when borrowing money from loved ones.
An overdraft line of credit is a good alternative to payday loans but be sure to avoid bounced check protection (or, more accurately, bounced check profiteering).
Credit card cash advances are a dangerous alternative to payday loans. Please read our article Twelve Differences Between Payday Lenders and Credit Card Companies to learn more about the different ways some credit card companies prey on consumers.
The most dangerous and unethical alternative is taking money from a loan shark. Our article Sixteen Differences Between Payday Lenders and Loan Sharks offers a detailed comparison of licensed, legitimate payday lenders and unlicensed, illegal loan sharks. When you do business with loan sharks, you not only risk your life and property, you may also be helping organizations that undermine national security.
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