Military Payday Loans: The Bad and the Good

You may not have noticed, but payday loan providers are becoming more and more prevalent in cities and communities across the country. While many states are passing regulations and laws that severely restrict the interest rates and fees that payday loan providers can charge customers, consumers by and large still remain ignorant about the dangers posed by abusing cash personal loans. Some of the largest users and abusers of payday loans are American service members, many of whom are young and not well-disciplined when it comes to money management. And while military payday loans can certainly serve a legitimate purpose if properly used, there are plenty of pitfalls that come with using them too often.

The average service member looking for a military payday loan is likely a younger person who recently entered the military and who doesn't much worry about his or her credit score or future credit limitations. The Army, Air Force, Navy and Marine Corps do their best to educate new trainees regarding the proper maintenance of their bank accounts and credit, but some new recruits are overwhelmed by their new found ability to get cash advances and credit accounts. Military payday loans are a lucrative business for some mainly because of the exploitation of service members who aren't educated about good financial practices, and simply knowing the facts can prevent many new recruits from making borrowing decisions they may regret in the future.

It's important to remember that military payday loans, like many other types of high interest loans, can serve a legitimate and necessary purpose if used properly. If a consumer with a poor credit score needs fast cash to pay for an emergency expense such as medical bills or housing, then payday loans can provide a quick fix to a hard problem. But when individuals take out payday loans only to pay for recreational expenses that could have waited for the next paycheck to come along, then a pattern of credit abuse is possible that could take years and years to dig out of. Although military members pride themselves on their discipline, they sometimes lack the discipline to stay away from high-interest cash advances that drain them of the money they've earned.

It sounds like a simple preventative tool, but in reality the best possible way for a service member to make himself immune to the temptations of military payday loans is to establish a savings account. Most banks today offer electronic banking that allow customers to set up an automatic transfer of a set amount of funds from the checking account to a separate savings account every month. By having your military paycheck automatically deposited into your checking account, and setting up an automatic transfer of funds into a savings account, you can amass a rainy day fund without even realizing it. Even a hundred dollars a month in savings can add up to a pretty substantial amount given a year or two, and your cash reserves will make it much less likely that you'll ever be tempted to take out a military payday loan again.

As we said, service members show a remarkable amount of dedication and discipline when conducting themselves on duty. It's really a simple process to transfer that discipline into our personal and financial lives, as well. By taking personal responsibility of our own financial futures, we can break free of the many dangers of high interest payday loans and increase our healthy spending abilities. There is both good and bad in military payday loans, but if you or your family aren't in a situation where emergency funds are needed immediately, you're much better off staying away from payday lenders and relying on your own good credit and savings account to make ends meet.