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Military cash advance loans could be very helpful for a short term or emergency situation. These loans work by lending a sum of money at an exorbitant interest rate, with the understanding that it will be paid in full on the next payday. If it were not paid on or by that date, then payments with significant other charges accrued would be made on each following payday. These payments were usually debited directly from a bank account, either as an allotment, a personal check, or a pre-approved withdrawal. These loans have also been known as payday loans or payday advance.
At one time, offices that specialized in military cash advance loans could be found outside virtually every military base.
This changed in 2007, when the FY 2007 Military Authorization Act went into effect. This Act prohibited these facilities from giving payday or car title loans to members of the military. It also made it illegal for any loan of this type to be given to a military member at an interest rate above 36 percent. This drastically altered the way that these locations could stay in business.The vast majority of these businesses wound up either closing entirely, or dramatically altering the types of loans that could be given.
Prior to 2007, a number of activity military personnel accrued a significant amount of debt by accepting these loans.
A person could expect to be charged as much as eight hundred percent interest, including items such as renewal and service charges. The short term loans that caused this debt to the military members were appealing due to several different factors. These factors included the ease with which they could be obtained, as well as the lack of credit needed, among others.
It was common for military cash advance loans to be renewed multiple times. It could often result in a situation that was almost impossible to get away from, and continue to escalate into ever-increasing debt. This could be especially true for any member of the military who had extensive debt or negative credit prior to the original payday loan.
The FY Military Authorization Act was a life changing event for many of the people who had been involved with these types of loans prior to October of 2007. Although there was some initial concern that loopholes in this act would allow these loans to continue, those reports have been minimal.
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