I am in the military, are there limits on how much I can be charged for a loan like a mortgage, student loan, auto loan, or credit card balance?
Yes, if you are in military service, the Servicemembers Civil Relief Act (SCRA) limits the amount of interest you can be charged for certain loans or other obligations you took out prior to entry into active-duty military service to 6 percent. Meanwhile, the Military Lending Act (MLA) limits the amount of interest you can be charged for certain loans you take out while on active-duty military service to 36 percent.
The 6 percent interest rate cap applies to: auto loans, mortgages, credit cards, other installment loans, and student loans taken out after August 14, 2008. The SCRA also applies to loans that you and your spouse took out together.
In order to qualify for the 6 percent interest rate cap, you must:
- Currently be in active-duty military service;
- Have taken out the loan before entering active-duty military service;
- Notify your lender in writing and include a copy of your military orders calling you to active duty.
Learn more about whether you’re covered by the SCRA.
You can request an interest rate reduction from your lender at any time while you are serving on active duty and up to 180 days after release from active duty. To get the reduction, you must provide your lender with a copy of your orders calling you to military service, which also shows the date from which to calculate your reduction.
When you make a proper request for an interest rate reduction under the SCRA, your lender must reduce your interest rate to 6 percent for the entire time you are serving on active duty. The interest above 6 percent is forgiven. This means your lender can’t add the amount of interest above 6 percent back into the loan later after you leave active duty.
Your lender generally has to refund any amount that it charged you above the 6 percent cap, starting from the date of your entry onto active duty through your last day of active-duty military service. For mortgages, the interest rate reduction lasts one year past your last day of active-duty military service.
For loans taken out while on active duty, most types of consumer loans offered to active-duty servicemembers and their dependents have to comply with the Military Lending Act (MLA), which limits loans to a maximum of 36 percent interest. These credit products include, but are not limited to:
- Payday loans, deposit advance products, and vehicle title loans;
- Overdraft lines of credit but not traditional overdraft services; and
- Installment loans, with some exceptions.
There are some loans the MLA doesn’t cover – namely, credit that is secured by the property being purchased. These loans include:
- Residential mortgages (financing to buy or build a home that is secured by the home), mortgage refinances, home equity loans or lines of credit, or reverse mortgages;
- A loan to buy a motor vehicle when the credit is secured by the motor vehicle you are buying; and
- A loan to buy personal property when the credit is secured by the property you’re buying, like a vehicle or home appliance.
If your lender refuses to change your interest rate to 6 percent, or if you have a loan with an interest rate higher than 36 percent, please contact your closest for help. You also may be able to get assistance from or the .