Can I Get a Direct Payday Loan if I’m in the Military?
We recently received an email from a consumer who lives in Texas. He had come to our site looking for information on who the best lenders were in Texas. After reading through our Frequently Asked Questions, he realized it would be difficult to get any type of payday loan. You see, this consumer is active duty military with a discharge date that’s years away. At this time, It’s nearly impossible to find a reputable direct lender that offers military financing. In his email he wanted to find out if there was anything he could do to get a short term loan. We wrote him back and explained how the laws affected his situation. With that being said, this is a common question that’s asked of us. In this blog post we’ll do our best to explain why it’s so tough to get a direct payday loan if you’re an active member of the military.
The consumer mentioned above had no idea about the laws that were affecting his chances of getting a cash advance. Even though he resided in Texas, which is a state with many direct lenders, he was not going to get too far because of the Military Lending Act. This Act states that payday loan companies and car title loan companies can not charge an interest rate on a traditional direct payday loan of more than 36%. In theory this would be just fine. Even 36% sounds high for someone with bad credit when compared to applying for a traditional bank loan or online car loan. Pretty much every reputable direct payday lender ceased offering loans to consumers and spouses in the armed forces when these regulations went into effect. The reasoning was that anyone who’s looking for a direct payday lender has pretty much tapped out the normal ways of getting a loan. They say a cash advance is intended to be a short term emergency option for fast cash. Essentially there would be no way to make money on a loan if the rate is capped at 36%. That’s when you factor in overhead and loan defaults at current rates. These defaults are rather common in the payday loan and car title lending industry.
These regulations went into effect years ago. On the surface they’ve done what they intended to do. That is, push large direct payday lenders out of the business of offering loans to military members. Currently, no trusted payday loan companies in our database are providing this form of financing. As with any government restrictions these laws have created loopholes and other problems. Some online payday advance companies seek to take advantage of the situation. Some small cash advance companies are now offering car title and installment loans. They claim these are not subject to the Military Lending Act. These lenders claim they’re exempt if they offer online loans for longer than 91 days and the loan is for more than $2,000. These companies have skirted the Military Lending Act for years based on these loopholes but it looks like that will change soon. As of last year the Department of Defense was actively considering making changes to the Lending Act. Prospective changes would close these loopholes and create new restrictions. The goal is to make it even harder for any company to offer a direct payday loan to someone who is active duty.
Don’t apply for direct lender payday loans if you’re in the military. You won’t be approved!
It will be interesting to see how things play out with these proposed changes as we move through 2020. It’s clear that reputable payday loan companies will stay on the sidelines as long as interest rates can’t exceed 36%. While that may seem good to some people it also shuts the door on many consumers who need a short term cash advance. Essentially there are no options on the table for someone in the military that’s dealing with a sudden financial emergency. Direct lender payday loans have always gotten a bad rap. But when used correctly they can serve a purpose. It’s important to not fall behind on payments and contact your lender if you need to work out an alternate payoff plan. Unfortunately, these strict regulations are in place for a reason. Unless something changes there is nothing we can recommend for our visitor that had emailed us.