If you have ever driven around the proximity of a military base you will see certain types of businesses waiting for our service men and women to come on in. These businesses are not illegal; however they do have a reputation as bottom feeders. So why do the congregate around military bases? The sad truth is most military personnel do not get paid well so they are a segment of our society that is sometimes seen as an easy target.

As you’re driving count the Check Cashing outlets, Payday Loans stores, and Pawn Shops. These merchants are well known for high fees, outrageous interest rates, and undervalued deals that many times trap our military personnel in a vicious cycle of debt, and poor financial decisions.

Payday Loan stores – We all know military pay is on the low side of our economic scale so it’s not surprising that during a short term emergency these folks may need a quick influx of cash. Many times they go straight for the convenient payday loan store where they take out a loan. If the cannot pay out during the first cycle they renew and can end up paying interest rates as high as 650% in some states. As an alternative, they should take advantage of financial counseling services provided on base, or use a more traditional financial institution like a bank or credit union and take out a short term loan with more reasonable rates.

Check Cashing outlets – These outlets turn a profit by charging a check cashing fee for their service. The problem is the same check cashing services may be available more economically at banks and credit unions. Many bases will also have a military exchange that will cash checks for free until you have time to establish new accounts.

Pawn Shops – Off base pawn shops consistently undervalue property offered as collateral. Many of them also offer title loans, which come with very high interest rates and can very easily lead to the loss of your vehicle. None of these options are the best for the military consumer; they should explore other alternatives for their short term cash needs. For example, there are military lenders that provide alternatives to military payday loans (with great rates).

Military families face many of the same obstacles as those faced by all Americans. These families maneuver in a different atmosphere and have unique financial options and considerations that may affect there approach to overall fiscal planning. National Guard and Reserve members face a different set of obstacles as there families must be prepared for the inevitability to report to active duty.

Whatever group they fall into service members need to look into both military programs and the private financial options available to them when addressing saving opportunities. They need to create a comprehensive strategy that encompasses both short and long term approaches. These should include traditional savings account held in banks and credit unions as well as higher risk investments for the longer term like stocks, mutual funds and bonds.

They should take advantage of what the military offers them in the way of saving vehicles. This will include the militaries Thrift Savings Plan (TSP) which offers similar saving and tax benefits as 401(k) plans provided by private companies. Military members also have access to reasonably priced life insurance. Active duty personnel are automatically issued a $250,000 life insurance policy through the Servicemembers Group Life Insurance Program (SGLI).

National Guard and Reserve personnel need to be more informed as they need to know about not only their military benefits, but also those offered to them in the private sector, and where the gaps are. It is recommended that they save for an emergency fund that provides them with 3 to 6 months of monies that will cover any gaps between military and civilian pay. These members must also comprehend the differences in healthcare coverage provided by the military and any private insurance they may carry. Go to http://www.esgr.org for assistance in understanding your options and what employers must supply.

There is a critical need for personal financial management in all circumstances. Our current environment brings a new focus to families with members in the armed forces and there overall financial needs.

Other military benefits include improved terms on VA loans, bad credit loans, and protections against military payday loans and payday lenders.

Military payday loans have been a hot topic since 2006-2007. Payday loans are short term loans that involve quite high fees and payments. For example, in a typical payday loan transaction, the borrower can borrow $300 for two weeks (until their next paydate). The fee for the short term loan? Up to $90. Pretty expensive!

Military members were often big users of these short term loans. And payday lenders loved working with military borrowers — military personnel get paid on a regular basis, and have a predictable source of income. Good for the lenders. Bad for the military.

In 2007, Congress passed a law based on a bill introduced by John Warner (called the “John Warner National Defense Authorization Act for Fiscal Year 2007″). The law effectively made it illegal for payday lenders to issue military payday loans (or military car title loans).

The law makes it illegal for payday lenders (and other lenders for that matter) from charging more than 36 percent interest to military borrowers. Fees, service charges, renewal charges, credit insurance premiums or any other product sold with a military loan must be included when calculating the interest rate.

The law has effectively closed down military payday loan operations around military bases. The law also makes it illegal for payday lenders to lend money to military members or their families using a check, or any other means of access to a financial account, as security for the loan. (a typical technique used in military payday loans).

The new law took effect on October 1, 2007. Lenders who violate the provisions of the law are subject to a fine and up to one year in prison.

Here are a few details about what the law prevents:

• Requiring military members to set up an allotment as a condition of receiving a loan.
• Requiring the use of a vehicle title as security for any loans made to service members and military family members.
• Using a check or any other access to a member’s financial account as security for a loan.
• Lenders are prevented from renewing, repaying, refinancing, rolling over, or consolidating consumer credit using the proceeds of other credit granted by the same lender to the military member.