August 8, 2019

Being in the military is a daunting and difficult job, and members should not have to worry about their finances. Unfortunately, that’s not the case today, since 62% of military families say finance is their biggest concern. Many loan companies specifically market themselves to military members. Fortunately, federal government regulations are put into place to prevent military members and their families from predatory lenders. However, companies still engage in bad business practices and people can get caught up with bad fees and high interest. Military members that find themselves saying “I need a loan with bad credit,” should be even more cautious of high interest rates and fees, since lenders are even harsher on those with poor credit. Let’s take a closer look at military loans for bad credit.

What are Military Loans for Bad Credit?

If you’re in the military and said to yourself, “I need a loan with bad credit,” it’s important to understand what loans are available to you. Military loans for bad credit can be defined as any sort of loan marketed towards those in the military with a rocky credit history. Barring some exceptions, these loans are generally a form of unsecured loans. They’re offered by online lenders and financial institutions, including banks and credit unions. In general, for those with poor credit, any sort of loan is more difficult to come by. This remains true for members of the military. As a rule of thumb, you are considered to have bad credit if your FICO score is below 580. FICO is a credit reporting agency that assigns you a score out of 850 based off your ability in the past to repay loans on time.

Although these loans may seem like they are an attractive option, there are many drawbacks. Especially with military loans for bad-credit-borrowers, there are high interest rates and fees relative to more budget friendly options. Although banks and credit unions are more likely to offer lower APRs than less established payday lenders, the lower your credit is the harder it is to obtain one of these loans from established institutions.

“Although these loans may seem like an attractive option, there are many drawbacks.”

Know Your Rights

Fortunately for those in the military, the government has put in place some regulations for members and their families so they can avoid the predatory practices of payday lenders. The Military Lending Act, passed in 2006, limits the APRs for loans given out to military members to 36%. However, this APR doesn’t take into account many of the other fees associated with military loans. Some examples of fees include:

1. If the lender attempts to recover funds but there’s not enough money in your account, your bank may charge an NSF (Non-Sufficient Funds) Fee (usually around $35).

2. If you don’t meet the deadline, the lender may charge a Late Fee.

3. Most lenders charge an Application Fee.

The law claims to prohibit loans that would cause financial harm to the customer. It also mandates that lenders must disclose more information than required for other loans, as dictated by the Truth in Lending Act.

Another plus for military members seeking loans is the Servicemembers Civil Relief Act (SCRA). This law further limits interest rates on fees and allows military members to avoid penalties on their credit score if they are unable to pay back a loan.

Alternatives to Military Loans for Bad Credit

Despite the government’s best efforts to protect military members, lenders still find ways to take advantage of the customer. Even if interest rates are capped, you’ll still end up paying a good fraction of your loan due to interest. Also, many different types of fees are present. That’s why it’s worth taking a look at some alternatives.


1. Credit Builder Loans – Many banks and credit unions offer these types of loans for those with poor credit. They are long term loans, usually months, that are meant to help people increase their credit score.

2. Nonprofit programs for military members – There are many nonprofits devoted to helping veterans and current military members protect themselves and their families from financial distress. One such example is the Save and Invest Military Center.

3. Brigit – This app has financial tools to help you spend smarter and track your finances better. It is the best option for anyone looking for budgeting help and in some cases, cash that is easy, fast, and reliable. There is no credit check when signing up, no interest, and no hidden fees. If you need cash in a bind, there is no better option!