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> Types of Military Loans |
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1. Installment Loans:
Military installment loans are standard loans for a set amount at
a set interest rate and set time period (for example, a $1,000
loan at 12% interest with 12 monthly payments). Some lenders may
also charge fees with the loan. Loans offered by Pioneer
(recommended on this site), are installment loans.
This type of
loan should be avoided unless absolutely necessary for emergency
purposes. |
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2. Military
Payday Loans:
A 2007 DoD regulation that capped military loans at
36% has effectively put an end to payday loans to military
members. A military payday loan was a loan that was due on the
next payday. For example, a servicemember would borrow $500 and in
two weeks (on the next payday) the servicemember would owe $600 to
the lender. However, often the servicemember would be unable to
pay the lender and the loan would be rolled over, perhaps many
times over the course of many paydays, accumulating interest on
each payday. Eventually, the loan would become so big, the
servicemember would be trapped in a vicious downward debt cycle.
Though lenders are now forbidden to offer servicemembers such
loans, some loan companies have found creative ways to work around
the cap.
This type of
loan should be avoided at all costs. |
3. Rent-to-Own
Loans:
Rent-to-own loans are used by stores that primarily cater
to lower-income people unable to obtain traditional credit such as
credit cards and department store financing. Rent-to-own stores
sell such items as furniture and appliances, electronics,
computers, jewelry and cameras. Here are some of the items we
encountered for rent-to-own at stores outside Marine Corps Base
Camp Pendleton, California.
a. A $500 TV with 36 "easy" payments of $50, making the total cost
of the TV $1,800.
b. A Mothers Day necklace, probably worth less than $20, with
total payments of $440.
c. A camera package with a cheap camera, camera bag and "free"
lifetime photo developing for 52 "easy" payments of $29.95
($1557.40).
d. A kitchen table, retail $400, available for rent-to-own at
payments totaling near $1,500.
This type of
loan should be avoided at all costs. Look to your local Craigslist
if furniture and appliances are absolutely and immediately needed. |
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4. Car Title Loans:
A car title loan is a loan where the borrower puts up the title to
their car as collateral for the cash loan. Car title lenders will
loan up to 50% or more of a car's resale value. These loans are
usually short term, like payday loans, that carry a high interest
rate. Often, these loans are rolled over if the borrower is unable
to pay on the due date, making the entire cost of the loan even
higher. This type of loan should be avoided as it could result in
the repossession of your car. |
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