The Military Lending Act (MLA) caps annual percentage rates (APR) at 36% for members of the military, military spouses and their dependents. That’s why many payday lenders don’t offer loans to applicants that the MLA covers — the cost of the loan is too high. But there are less-expensive alternatives out there, even if you can’t qualify for a traditional loan.
While the MLA doesn’t apply to every loan, it does offer special protections to prevent you and your family from falling into debt from extreme interest rates.
4 alternatives to emergency military loans
As a member of the military or a military dependent, you’re eligible to apply for unsecured personal loans with a rate under 36%. There are also helpful alternatives to borrowing money — available to both military members and civilians — to keep you out of debt.
1. Bad credit personal loans
Seeing a gap in the credit market, many lenders offer loans for military members, retired military and their families that specifically comply with the MLA. These loans can range from $500 to $40,000 or more.
2. Military relief societies
If you’re experiencing financial challenges, each branch of the military has set up its own relief society in order to help both currently serving and retired service members. While each society has different rules and programs, they’re set up so that the military can help take care of its own. Some of the programs include interest-free loans, grants that don’t require repayment, financial counseling, and more.
3. Special programs for veterans
The MLA and SCRA only apply to active-duty military members. However, there are a number of other resources available to veterans who are experiencing a financial crisis.
- Operation First Response
- USA Cares
- VFW Unmet Needs
- VA financial hardship assistance
- Armed Forces Foundation
- US Department of Veterans Affairs Aid & Attendance or Housebound Assistance programs
4. Other financial programs
These programs aren’t exclusive to active military members or veterans, but they may still provide some relief if you need an emergency loan.
MLA regulations on payday loans
Lenders are subject to the MLA — a law intended to prevent lenders from gouging military personnel with exorbitant interest rates and fees that come with payday loans.
Active-duty military members and military spouses are protected. The MLA forbids:
- APRs over 36% — this includes interest and fees
- Waivers on consumer protection laws, including mandatory arbitration
- Mandatory allotments — or automatic repayments from your paycheck — for loan approval
- Prepayment penalties
These regulations include traditional payday loans, installment loans, overdraft lines of credit, credit cards and some student loans.
The MLA is enforced by the Consumer Financial Protection Bureau (CFPB), an agency of the US government responsible for consumer protection in the financial sector. If you believe that your consumer loan violates the MLA, you can submit a complaint to the CFPB.
Exceptions to the MLA
While the MLA forbids specific predatory lending to military personnel, it doesn’t cover most secured loans, including:
- Auto loans
- Loans secured by the property you’re buying
Some lenders also work around the specifics or bend the rules of the law by designing loans that are nearly indistinguishable from loans rendered illegal by the act.
More protections under the SCRA
The MLA only applies to lending. But the Service Members Civil Relief Act (SCRA) covers other areas of a military member’s finances, including rental agreements, security deposits, prepaid rent, evictions, installment contracts for loans, credit card interest rates, mortgage interest rates, mortgage foreclosures, auto leases, life insurance, health insurance and income tax payments.
There is also a 6% interest rate cap on loans or other financial obligations you agreed to before entering military service.
How to compare loans
Look for loans that comply with the MLA. Then keep these factors in mind to narrow down a loan that works best for you:
- Interest rate and fees — the annual percentage rate (APR) on a loan must be under 36%
- Requirements — lenders typically require credit scores of 670 or higher
- Repayment flexibility — and no prepayment penalties
- State regulations and licenses
The MLA protects you from predatory loans. But not every lender is legitimate and follows these guidelines. Confirm your lender follows regulations — and if it doesn’t, look for a different lender and file a report with the CFPB to protect your fellow service members.