Pentagon, Department of Defense Consider Short Term Loan Changes for Military

Pentagon, Department of Defense Consider Short Term Loan Changes for Military 

As part of their annual review of defense policy, the Senate Armed Forces Committee has accepted changes to the Military Lending Act of 2006. 

All the committee has done, however, is refine their definition of a payday loan to include other types of short term loans. The Committee has also charged the Pentagon with the task or reviewing and researching different short-term credit products, including installment loans, to gauge their effect on members of the military and their families. 

Proponents of these changes argue that money woes can affect a soldier’s readiness, and can distract him or her from their duties, thus putting other soldiers in danger, as well. 

In 2006, the original measure essentially banned payday loans by instituting a 36% APR cap. With this restriction, payday lenders are unable to generate enough profit to cover operational costs. 

Privates in the U.S army make near or less than $20,000 a year. Specialists and corporals make $23,000. Not until a soldier reaches the rank of Staff Sergeant does he or she make more than $25,000 a year. Many young military families are on tight budgets, and living with little or no savings. Any unexpected expense can throw them off-kilter. While the armed forces does provide financial counseling, and special banking options, money problems are still common. 

Luckily, members of the armed forces have avenues for obtaining small dollar loans through programs offered by their institutions, or through a slew of organizations – like peer to peer networks – that are set up specifically to support members of the military. 

Civilians, on the other hand, are often left with no where to turn if they are rejected by the bank. In many cases, non-traditional lenders are the only option for keeping the lights on.