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SCRA and MLA: How They Can Help You Financially


Have you ever been frustrated about your credit situation? You may have joined the military, hoping to get ahead, but you still have some debt you need to deal with. Did you know there are protections just for active duty military members that can help you financially? 

Life in the military can be unpredictable and can bring with it unexpected expenses. A PCS can cost more than you think it might, and you may have to spend more than you thought during a deployment for many different reasons. While being debt free is your goal, it may seem like something always gets in the way of getting to that goal.

SCRA and MLA can help you financially. Here is how:

What Is SCRA?

SCRA stands for the Servicemembers Civil Relief Act and provides important safeguards to active duty members of the US military. SCRA can help when it comes to different areas of financial management, as well as rental agreements, security deposits, evictions, and civil judicial proceedings.

The Servicemembers Civil Relief Act was enacted in 2003, and has been amended several times since. It expanded and replaced the Soldiers’ and Sailors’ Civil Relief Act of 1940.

What Does SCRA Do to Help Your Credit?

When it comes to credit, SCRA can help by capping your interest rates at 6%. This applies to interest rates on loans and obligations incurred before you joined the military, as long as military service materially affects your ability to pay the debt.

SCRA also allows a servicemember to terminate an automobile lease under certain circumstances. If the lease was from before joining the military, it may be canceled if you have received orders to active duty for a period of 180 days or more.

If you entered into the lease while on active duty, it may be terminated if you have received PCS orders overseas or deployment orders for 180 days or more.

Mortgages are capped at 6% during the entire period of your military service and for one year after service is over.

Some SCRA rules were applied to student loans in 2008, however, if you have a federally guaranteed student loan that was originated before August 14, 2008, SCRA rules don’t apply.

The 6% cap may apply to your credit cards, automobile, ATV, boat, and other vehicle loans, mortgages, home equity loans, and student loans, although there could be limitations based on the type of credit.

Who Qualifies for SCRA?

In order to qualify for SCRA, you must be on active duty, a Reservist on federal active duty, or a National Guard member on federal orders for a period of more than 30 days. If a servicemember is absent from duty for a lawful cause or because of sickness, wounds, or leave, they may still be covered by SCRA. 

Most of the SCRA protections start the day a servicemember goes on active duty and continues until 30-90 days after active duty ends. Reservists would start the day that they received military orders. SCRA can also apply to spouses and children of a servicemember as long as they rely on the servicemember for at least 50% of their support.

How Do You Get SCRA Benefits?

You must provide your creditor with a copy of your military orders, and a written notice within 180 days of the end of your active duty military service.

After receiving your information, the creditor must forgive interest that is higher than 6% retroactively. Creditors may not accelerate the payment of principal in response to a properly made request for the 6% interest rate.

Certain companies will even go beyond what the law states and offer a bit more to service members using their SCRA benefits. American Express, Bank of America, Discover, Capital One, and Chase are examples of these companies.

What Is MLA (the Military Lending Act)?

MLA stands for the Military Lending Act and was enacted in 2006. MLA protects active duty servicemembers, spouses, and dependents; the protections are geared toward payday loans, deposit advance lending, vehicle title loans, overdraft lines of credit, and certain installment loans.

It does not apply to traditional overdraft services, mortgages, auto loans when secured by the motor vehicle purchase with the loan, and other types of credit not mentioned above. It is also not for lines of credit that are used for business, agriculture, or commercial purposes.

With MLA there is a 36% annual percentage rate cap, which covers certain finance charges, certain credit insurance premiums/fees, add-on products sold in connection with credit, and application or participation fees and related charges (exceptions may apply.) MLA also means that there can be no mandatory arbitration or prepayment penalty and no mandatory allotments.

Who Qualifies for MLA?

Active duty military, active reserve, national guard troops on Title 10 orders, spouses, and dependents with a valid military ID can qualify for MLA. MLA applies to protected accounts that were opened while the servicemember or family member are eligible.

How to Receive MLA Benefits?

In order to receive these MLA benefits, contact your lenders or credit card companies. Some companies will be more generous about them than others. Some might even apply these benefits automatically, but you should always double-check to ensure you receive them.




About the author

Lori Waddell serves as Co-director of an emergency response COAD in Montana, a freelance writer, and an Air Force Key Spouse. She is passionate about empowering communities and individuals through knowledge and resources. She currently lives in Montana with her husband and two children.