ARTICLE
4 minute read•Dec. 6, 2023
If your service member ever gets into financial trouble, it can impact their military career. For this reason, there are two major laws – the Servicemembers Civil Relief Act and the Military Lending Act – that help protect the finances and ease the stress of active-duty service members and their families.
SCRA interest rate limit
The SCRA can help service members who come into the military with high-interest debt. It limits interest rates on debt to 6%, including debt held jointly with a military spouse. The interest rate reduction covers the time when a service member first entered active-duty status to the day they are no longer active.
To get this benefit, your service member must request it in writing from creditors and include a copy of their military orders and any notices extending military service. The legal office of a military installation can determine if your service member qualifies and can help write the letters requesting the 6% cap. Your service member has 180 days from their last day of active service to inform creditors of the change.
SCRA housing protections
These protections in SCRA are known as “the military clause.” If your service member owns a home, it can’t be foreclosed on without a court order, if the mortgage was taken out before being on active duty. If your service member has a rental, they can end leases they signed before active duty.
In addition, if your service member has permanent change of station or deployment orders of at least 90 days, they can end a housing lease without penalties. They need to give their landlord a written notice of lease termination along with a copy of orders or a letter from their commanding officer. Another SCRA benefit: landlords can’t evict active-duty service members or family members without a court order.
More SCRA protections
- Vehicle leases can be ended if your service member is deployed for 180 days or longer after they sign the lease.
- Life insurance is reinstated for nonpayment of premium for two years after military service is completed.
- Your service member can request the postponement of civil court proceedings, such as bankruptcy, divorce or foreclosure, for at least 90 days.
Military Lending Act
The MLA protects your active-duty service member – including National Guard soldiers and reservists on active-duty orders for 30 days or longer – by capping the cost of credit at 36% Military Annual Percentage Rate. Interest, application fees and credit insurance, which pays off debt due to death or makes payments on debt if your service member is disabled, are covered under the MLA. Family members enrolled in the Defense Enrollment Eligibility Reporting System are also covered under MLA.
The MLA covers credit card debt, vehicle title loans, unsecured open lines of credit, refund anticipation loans, installment loans and pawn loans. Loans to purchase or refinance a home are not covered under the MLA, nor are vehicle loans or loans secured by property.
Lenders must disclose both orally and in writing that the Military Annual Percentage Rate is to be applied to the credit being offered, along with a clear description of payment terms. Lenders may not require your service member to waive their legal rights or to submit to arbitration. Lenders also cannot require repayment by military allotment.
Additional information
Learn more about the SCRA and MLA and their important features:
Military members can also reach out to their installation’s personal financial manager or personal financial counselor for more information on protecting their finances and making good financial decisions. Your service member can also contact Military OneSource to speak with a financial counselor.
FAQs
The SCRA enables servicemembers to devote their time and attention to the defense needs of the Nation by providing protections related to such things as rental agreements, security deposits, prepaid rent, evictions, installment contracts, credit card interest rates, automobile repossessions, mortgage interest rates, ...
What are some additional protections for qualifying servicemembers provided by SCRA? ›
There are three primary areas of coverage under the SCRA: (1) protection against the entry of default judgments; (2) stay of proceedings where the servicemember has notice of the proceeding; and (3) stay or vacation of execution of judgments, attachments and garnishments.
How do service members qualify for SCRA interest rate relief? ›
If you took out an automobile, home, or student loan or incurred credit card debt prior to becoming a servicemember (also known as a “pre-service obligation”), or if you took out such a loan jointly with your spouse, then you are entitled to have your interest rate reduced to a maximum of 6 percent per year.
Does Military OneSource have financial advisors? ›
Military OneSource offers telephonic counseling with certified financial planners who will help you review your options.
Which protections exist under the SCRA Quizlet? ›
Generally, the SCRA prohibits the sale, foreclosure, or seizure of property based on a breach of such a secured obligation during the period of military service or within 12 months thereafter.
What does SCRA not cover? ›
Criminal judicial proceedings: While the SCRA protects you from having to appear in civil court, if you are charged with criminal acts, the SCRA does not protect you from those court appearances.
What is the 6% rule for SCRA? ›
Among other things, the SCRA establishes a maximum of 6 percent interest on financial obligations incurred by servicemembers before military service, restricts foreclosures on obligations held or guaranteed by servicemembers, provides protections against default judgments, and permits early termination of certain ...
Can you waive SCRA rights? ›
It is possible to waive your rights under the SCRA. Only written waivers signed during or after a service member's period of military service are effective. If you sign a waiver of your SCRA rights before you enter military service, the waiver will be considered invalid.
How long do SCRA benefits last? ›
Benefits start on the date active duty orders are received, and SCRA protection generally terminates one year after the date of discharge of active duty; in limited situations, a servicemember's dependents may also be eligible.
Does SCRA apply to 100% disabled veterans? ›
If a person with a disability status is called to active duty service, they can activate SCRA protections. However, disabled veterans are not entitled to unique benefits under the SCRA. This means disabled veterans aren't provided special perks not extended to other military personnel.
For your convenience, you can submit your request using the SCRA Benefits Request Form. You'll need to include the following information in the form or in a separate written request: Initial Active Duty start date. Date Active Duty orders were issued.
What is the 6% SCRA benefit? ›
Reduced interest rates — Creditors must reduce the interest rate on debts to 6% for liabilities incurred before you enter active duty. If the debt is a mortgage, the reduced rate extends for one year after active military service.
Is Military OneSource the same as Tricare? ›
While Military OneSource does not directly manage or facilitate any part of the TRICARE health benefits program, we want to make sure that you have all the information you need to make the best decision for you and your family to live your best MilLife.
What can Military OneSource do for you? ›
Trustworthy Information and Services
Turn to Military OneSource for tax services, spouse employment help, webinars and online training, relocation and deployment tools, and much more. You may request a copy of your Military OneSource records through the Office of the Secretary of Defense and Joint Staff at FOIA.gov.
Who runs Military OneSource? ›
Director, Military Community Support Programs
Ms. Slaton is responsible for the leadership, management and oversight of three centrally funded Department of Defense multimillion-dollar programs — Military OneSource, Military and Family Life Counseling, and the Spouse Education and Career Opportunities Program.
Which protections exist under the Servicemembers Civil Relief Act personal readiness? ›
It covers such issues as rental agreements, security deposits, prepaid rent, eviction, installment contracts, credit card interest rates, automobile leases, mortgage interest rates, mortgage foreclosure, civil judicial proceedings, and income tax payments.
What products are covered by SCRA? ›
The SCRA prohibits lenders from rescinding or terminating a contract for the purchase of real or personal property (including motor vehicles),14 or the lease or bailment of such property, absent a court order.
Which individual is protected by the SCRA and the military Lending Act? ›
The MLA provides protections to servicemembers and their dependents for credit extended while the servicemember is serving on active duty. In contrast, the SCRA protects servicemembers and their dependents with obligations incurred prior to entry into active duty.
Is National Guard protected by SCRA? ›
Default Judgment Protection: If a default judgment is entered against a National Guard servicemember during their active-duty service or within 60 days thereafter, the SCRA allows the servicemember to reopen that default judgment and set it aside if certain conditions are met.
