I’m 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.
The 6 percent interest rate cap applies to several types of loans or obligations, including: auto loans, mortgages, credit cards, other installment loans, and most student loans.
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.
It’s important to provide your lender with a copy of your orders calling you to military service because the orders are necessary to show your lender the date from which to calculate your reduction. It’s also required under the law to provide a copy of your military orders calling you to military service in order to be part of a validly requested interest rate reduction. 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.
The SCRA also applies to loans that you and your spouse took out together.
more about whether you’re covered by the SCRA.
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. Your lender can’t add the amount of interest above 6 percent back into the loan later on after you leave active duty.
For most obligations, the lender has to refund any amount that it charged you that was 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.
Learn more about the Servicemembers Civil Relief Act from the Department of Justice.
If your lender refuses to change your interest rate to 6%, contact your local JAG office for more information. To find your JAG Legal Assistance Office use the locator. You also may be able to get assistance from your state attorney general.