By Kimberly Lankford
Kiplinger's Personal Finance
Sunday, August 24, 2008
Military personnel are often young and transient, but they earn a regular paycheck from Uncle Sam. That makes them prime targets for shady sales practices and financial criminals.
Payday lenders, which sometimes charge more than 400 percent interest, used to line the commercial strips around many bases. But a law passed in October caps payday-loan rates at 36 percent for members of the military and has led some lenders to close. A few states now ban payday loans entirely.
That hasn't stopped some criminals from targeting cash-strapped military personnel with so-called advance-fee loans. Borrowers are told that they are credit risks and are asked to pay $900 to $1,800 (or more) upfront. Then the money disappears. "We get hundreds of inquiries about this every couple of weeks," says Holly Petraeus, director of the Better Business Bureau Military Line, which provides consumer education to military families.
What you can do:
· Get a zero-interest loan through a military emergency relief fund. Contact the community service office at your base for details. At Fort Hood, in Texas, soldiers can borrow up to $1,000 interest-free as often as twice a year through the commander's referral program. Car repairs and other basic needs generally qualify, and hardship cases may make soldiers eligible for more money.
· Join a credit union. Credit unions on base often offer short-term loans at competitive interest rates, Petraeus said.