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You can get a payday loan if you are in the military or an ex-military member, but there are differences. One of the benefits of being in the military is strong protection from unfair and predatory lending. This includes capping the APRs that payday lenders can offer. These protections allow military members to apply for short-term loans without as much worry. In this guide, we’ll run through everything you need to know about getting a payday loan as a military member.

How many military service members use payday loans? 

Payday loans are a widespread form of credit for military members and their families. In 2017, 44% of all military service members had used a payday loan at least once. Predatory lending companies consider military families a logical target because they are primarily young and inexperienced with financial products. Lenders have been known to single out and promote payday loans in locations on and around military bases for this reason. 

Are payday loans the same for military members?

No, there is a difference in the payday loans offered to military members and other citizens. The notable distinction is that all loans offered to military members have their interest capped. Federal law dictates a 36% interest limit in place for payday lending to military members as part of the military lending act. There are four states which enforce the same caps on all payday loans with an annual interest rate limit of 36% and a ban on additional fees:

  • Colorado
  • Montana
  • New Hampshire
  • South Dakota

 The Center for Responsible Lending recently argued for this 36% cap to be adopted in all states across the country.  

What is the Military Lending Act in the USA?

All lenders are subject to the Military Lending Act (MLA), which protects military members from the dangers of payday loans. MLA applies to all military members, members of the Reserve Component when activated for 30 days or longer, and their dependents and families so long as they are enrolled in the Defense Enrollment Eligibility Reporting System (DEERS). 

Why is MLA important?

The law is intended to restrict lenders from predatory lending against military personnel. Predatory lending refers to lending companies who use unfair practices when providing payday loans to their customers. These include:

  • Sky-high interest rates.
  • Add-on fees and costs that benefit the lender.
  • Rushed paperwork.
  • Unnecessary charges for those with a poor credit score

How does the Military Lending Act work?

MLA is a legal requirement defining regulations that credit companies must follow when lending to military members. The act requires:

A 36% cap on interest rates

All short-term loans under three months are restricted to 36% APR for military personnel. While this can still be considered a relatively high interest rate, it is far more reasonable than the notorious three-digit APRs for payday loans.

No mandatory waiving of consumer protection laws

Under MLA, a lender cannot ask you to give up your rights under state or federal laws, which they can require of the general public.

No compulsory allotments

Allotments for loans are automatic repayments that come straight from your paycheck. A lender can’t make you agree to a voluntary military allotment to be approved. 

No early payment Fee

A lender can’t charge you an added fee for paying back your loan before the end of the agreed period. 

Am I guaranteed a payday loan if I am in the military?

No, some states ban payday loans entirely, which could prevent you from getting one. Every state has different laws and statutes surrounding payday lending. If you’re unsure whether your state allows payday loans, see the list below.

However, if you apply for a payday loan in the military in a state that allows payday loans then you more than likely to be approved for your loan.

Legal

Thirty-seven states allow payday lending through regulating laws, including Alabama, Colorado, California, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Ohio, Tennessee, Texas

Illegal

Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont, West Virginia, and the District of Columbia currently prohibit payday lending. 

Is there support for senior citizens formerly in the military?

There are particular programs for those senior citizens who were formerly in the military. They may be eligible for a range of government benefits to support financial difficulties. These usually are explicitly aimed towards providing housing and healthcare. Make sure you can pay back your payday loan and have looked at payday loan alternatives before pursuing your payday loan.