No discussion of military loans and military lending is complete without a review of the “Military Lending Act” (or MLA) of 2007. In 2007, Congress added an amendment to the Defense Authorization Act to add very strong federal protection for American servicemembers against certain types of predatory lenders. The Military Lending Act became effective on October 1, 2007.

Here’s everything you need to know about the Military Lending Act.

Who is Protected?

The following individuals are protected by the Act:

• Regular or reserve members of the U.S. Army, Navy, Marine Corps, Air Force, or Coast Guard.
• Anyone serving on Active Duty under a call or order that specifies service for more than 30 days.
• Members serving on Active Guard or Reserve Duty.
• Any “card-carrying” dependent of an active duty military member.

What Types of Credit Are Covered By the Military Loan Act?

The Military Loan Act specified 3 types of loans as “consumer credit” that are covered by the Act:

1. Payday loans (at brick and mortar storefronts, over the internet, or made by phone or fax).
2. Vehicle title loans (where the loan is for 181 days or less and are secured by the borrower’s car).
3. Tax Refund Anticipation Loans (or “RALs”), where the tax refund goes to the creditor (like H&R Block) to repay the loan.

What Types of Loans Are NOT Covered by the Military Lending Act?

The following types of credit were not covered or limited by the Act:

• Residential mortgages (this includes refinancing, home equity loans or reverse mortgages).
• Car loans (where the loan is to finance the purchase or lease of an auto, and is secured by the vehicle).
• Open-ended credit (such as credit cards, bank overdraft lines of credit or any other truly open-ended form of credit).
• Any credit not subject to Truth in Lending Act disclosures (such as overdraft loans, etc.).
• Installment loans that last for more than 91 days, including all military installment lenders (such as Pioneer Military Lending), and loans not secured by a check or an ACH authorization.
• Rent to own loans.

A few other miscellaneous types of loans were also not covered. In some ways, all of these exclusions make it easier for certain predatory lenders to come up with products that evade the rules (but that’s the topic for another day!).

What Are the Protections Provided by the Military Lending Act?

Here are the main features of the Military Lending Act (which, again, apply to payday lenders, Car Title Lenders, and RAL lenders):

• Fees are capped at 36% APR. (this includes most fees as well as interest).
• A complete ban on securing a loan with a personal check, electronic authorization to debit a bank account, or title to a car or Military allotment.
• A complete ban on prepayment penalties.
• A complete ban on roll-overs, renewals, refinancing or consolidation (unless the renewal is at a better term for the borrower).
• A complete ban on things like mandatory arbitration clauses, any waiver of legal rights, etc.
• A requirement that Military members receive both Oral and Written disclosures before the credit is issued. (although certain loans can meet the oral disclosure requirement by providing a 1-800 number).

You can read more about the Military Lending Act here.

If you have been in the Military for any length of time, you’ve heard about Pioneer Military Lending (also known as Pioneer Services, a division of Midcountry Bank). Read more about this great company here.

Pioneer Services has been in the military banking business for more than 20 years. Pioneer is the military banking division of MidCountry Bank, and provides personal loans to active-duty and career-retired military of all ranks and branches of service, as well as to Department of Defense employees. Whether you’ve built a strong credit history, or you have credit problems, Pioneer Military Lending is a great option for you — they’ve helped thousands of Service men and women get the loans they need. Pioneer’s no-hassle military loans are available from $500 to $10,000 and offer competitive fixed rates, manageable payments, and no collateral is required.

Pioneer offers two convenient ways to apply—online, or in one of their 17 local offices. Their staff includes retired service members and military spouses, so they truly understand your unique financial situation.

Pioneer has received a ton of honors, including:

• In 2008, the Pioneer Services financial education program received a first-place award from the American Bankers Association. The program was also nationally recognized by the Veterans of Foreign Wars
• The Department of Defense named Pioneer Services one of the 15 recipients of the 2005 Secretary of Defense Freedom Award for our commitment to those who serve.
• Pioneer Services received the American Business Award in 2006 for “Best Corporate Social Responsibility Program” as a result of their amazing financial education program
• Pioneer Services offices won “Torch Awards for Marketplace Ethics” and the “Excellence in Customer Service Award” from the Better Business Bureau
• The Society of Human Resources Management and the Great Places to Work Institute named Pioneer Services as one of the 25 “Best Small & Medium Companies to Work for in America” in 2004 and 2006

If you are an American Service member (or veteran), your best financial move is to work with Pioneer for all your lending needs.

In this time of economic instability, it becomes more important than ever to have an emergency fund as well as cash on hand. It used to be that the amount of money you should have in your emergency fund should be equivalent to three months of your salary. However, since it usually takes longer than three months to get a job, the ideal amount would be at least six months worth. Some even put away about a year’s worth of their salary, tucked away in a stable institution or an interest-earning account. It should be remembered that an emergency fund should be easily accessible, so it’s important to think carefully as to where you should put it.

However, almost everyone has a financial emergency, where extra cash is needed for an unexpected bill. Whether you need money to pay for utility bills, long-overdue credit card bills or if you suddenly find yourself short on cash, a short-term loan may be the answer to your financial woes. And because credit companies are stricter now when it comes to loaning to consumers, an avenue that can be pursued by non-civilians are military loans.

There are different qualifying factors for a military loan, depending on which organization you’re borrowing from. Some qualify a military personnel for a loan who have a GS-6 or higher designation, have retired from the military after at least 20 years of service and or someone who’s either on active duty or working full-time as a reserve. Other military lenders may also require that the borrower doesn’t have any current bankruptcy proceedings.

Military loan payments are automatically deducted from the borrower’s paychecks, with the amount pre-determined by several factors, so there’s no risk of forgetting payments or due dates. And because military personnel have steady income, the risk of non-payment is also minimized. Traditional lending institutions protect themselves from non-paying borrowers or late payments, so they impose security measures, such as high and increasing interest rates, late fees and processing fees. These factors, however, make it difficult for other serious borrowers.

As non-civilians have the option of taking military loans, both lender and borrower are spared from having to undertake and undergo these procedures as there is no risk of delinquent payments since they are automatically deducted from the borrower’s paycheck. Hence, interest rates on military loans are reasonably lower. Military loans have shorter terms compared to regular loans, and because of the shorter payment term, borrowers don’t end up paying more than 100% of the principal loan amount due to the compounded interest over the years.

Given the current condition of the economy, it’s good to know that individuals who have been or are currently in service have the option of taking military loans to somehow address their money problems, without digging a bigger financial hole.