Payday loans, the infamous type of loan in which a person is able to get cash until their payday, is offered at ridiculous rates for civilians. It is not impossible to have to pay 300 to over 1000 percent in interest. However, military personnel are legally protected from having to pay such insane interest rates. For them a payday loan has an interest rate that is a little higher than what could be found on credit cards issued to individuals with bad credit. This means military men and women pay 36 percent or less interest when they sign up for a payday loan.
Yet, should servicepersons take advantage of payday loans? What exactly can they expect if they do agree to one? Well, with the exception of a significantly lowered interest rate, payday loans do not work any differently for military men and women. Basically, the loan company allows for a small loan ranging from around $100 to $2,000. In some cases there are fees that have to be paid upfront, but for the most part, payment is not expected until a person actually receives their paycheck.
At this point the average payday loan borrower is unable to pay the balance. So they either pay a little bit or they continue the process and make another payday loan to pay the first. They continue doing this until they get in financial ruin or until they are able to pay the debt completely, (though the latter scenario is not as common).
Despite the difficulties associated with them, payday loans continue to be an attractive option to individuals with low income and/or bad credit. Most payday loans do not require a credit check, as their only requirement is that a person have stable employment. They offer a large amount of cash quickly, without giving the same type of hassles banks or credit card companies would give. However, the person will pay for the convenience when they get charged with the enormous interest.
Military men and women, many of whom are only earning about $1,200, also get caught up in the payday loan cycle. With them they get a lowered interest rate, however their salary may still not be enough to cover the balance, especially if they have other bills to pay. Yet, payday loan companies continue to make military personnel their target market.
Payday loans should only be considered if there are no other ways to get the funds a person needs. When they are used, military men and women should not fall into the hype of the low interest rate… they still need to do proper budgeting to make sure the bill gets paid when it’s due. Most importantly, the military man or woman needs to use the payday loan as a wakeup call. When one has to turn to a payday loan, it’s a sign that they need to start saving up money for emergencies and other situations where they can draw on their regular paycheck. This process can start on as little as around $20 a week. In just one year a military family would’ve been able to save almost $1,000. And what is sacrificed at $20 a week? Maybe a carryout meal or maybe a tank of gas… it doesn’t matter. The amount is so small, that most, even those on smaller salaries should be able to find a way to afford it.
