7 debt and money facts every active-duty service member should know

Service members are trained to handle tough situations, and that same discipline can help when money problems start to build. The military also offers a range of programs that may make debt management easier, so you do not have to face financial stress alone.

Freedom Debt Relief highlights seven debt relief and financial support options that active-duty personnel should understand.

Key takeaways:

• The Servicemembers Civil Relief Act and the Military Lending Act provide important debt protections for military members.
• Financial and legal counselors are available through the military for personalized guidance.
• Avoiding default is important, since debt problems can put a security clearance at risk.

1. Learn Your Rights Under the Servicemembers Civil Relief Act

The Servicemembers Civil Relief Act, or SCRA, was created to help members of the armed forces focus on duty without being overwhelmed by certain financial obligations. It offers significant protections for debt that existed before service began, and it works alongside the Military Lending Act to help shield service members from financial harm while on duty.

Some of the main SCRA protections for pre-service debt include:

• 6% interest rate cap: You may request that lenders reduce the interest rate on qualifying debts to 6%. For example, a balance of $5,000 on a credit card at 18% could mean a much smaller monthly payment. For mortgages, the protection can continue for a year after leaving service.
• Foreclosure and repossession delays: If you fall behind on secured debts such as a mortgage or auto loan, the lender generally cannot foreclose or repossess without a court order. Home protections can extend for nine months after service ends.
• Protection against eviction: In many cases, you and your family cannot be evicted without a court order unless your rent is above a set threshold that changes over time.
• Civil court safeguards: If military duties prevent you from appearing in a civil case, such as divorce or custody proceedings, you may be able to obtain a 90-day stay. Default judgments are also restricted when you cannot appear because of service.
• Life insurance protection: A policy that existed before entering service generally cannot be canceled, made more expensive, or reduced simply because you became a service member.
• Lease and utility flexibility: If you are reassigned to a duty station for more than three months, you can usually end certain leases without penalty.

To use many of these protections, you may need to meet specific requirements, such as providing official military orders. Some protections can also be lost if debt is refinanced or consolidated, since it may no longer qualify as pre-service debt. A base legal assistance office can help explain the rules at no cost.

2. Understand the Military Lending Act

The Military Lending Act is a federal law designed to protect active-duty personnel, spouses, and dependents from predatory lending. It does not cover every kind of debt, and secured loans such as mortgages, auto loans, and RV loans are outside its scope. However, many unsecured loans taken out during service are covered, including payday loans, credit cards, and personal loans.

Key MLA protections include:

• 36% interest rate cap: Lenders cannot charge covered borrowers more than a 36% annual percentage rate, including certain fees and finance charges.
• Military Annual Percentage Rate disclosure: Because the law calculates loan costs differently, lenders must disclose the Military Annual Percentage Rate before a borrower agrees to the debt.
• No prepayment penalties: Covered borrowers can pay off loans early without added penalties.
• No waiver of rights: Lenders cannot require a borrower to give up SCRA protections or agree to mandatory arbitration as a condition of financing.
• No required allotments: Although military allotments can be used for automatic payments, lenders cannot force a borrower to use them in order to qualify for a loan.

As with SCRA protections, there may be exceptions and loopholes, so a legal aid office on base can be a useful resource.

3. How Debt Can Affect Security Clearances

Military careers can be affected by personal finances, since the armed forces weigh financial responsibility when evaluating security clearances. Financial concerns are one of the adjudicative factors used in those decisions, and many service members need a clearance for their jobs.

Good money management can suggest reliability and reduce stress, while debt trouble may raise concerns. Continuous vetting now uses automated checks of government and commercial records, including credit reports and suspicious financial activity, which means missed payments or defaults can surface sooner than they once did.

If money problems develop, it is better to tell a security manager before an automated alert does. Falling behind can trigger a review, and if the explanation is not accepted, a clearance may be suspended or revoked. In severe cases, that can affect pay or even lead to discharge. Appeals are possible, and improving your financial situation may help restore a clearance.

4. Put a Plan Around Your Money

Dealing with overdue bills, rent, utilities, and credit card balances can be stressful at home or while deployed. Keeping debt as low as possible can help reduce that pressure. These habits can make a difference:

• Create a budget: A budget is a spending plan based on your income and expenses, helping you see where your money goes.
• Build an emergency fund: Savings can help cover surprise expenses such as car repairs or family emergencies.
• Use military discounts: Many businesses offer discounts to military personnel, including on larger purchases and insurance.
• Save for retirement: Even with a military pension, additional retirement savings may be needed. The Thrift Savings Plan offers a tax-deferred way to invest for the future.

5. Get Ready for the Unexpected

Unexpected events can happen when you are away from home, so it helps to have your finances organized before a crisis arrives. A few important steps include:

• Make a will: A will explains how your assets should be distributed. For more complex situations, an estate planning attorney can help, while JAG may assist with simpler documents.
• Set up automatic payments: Auto pay can prevent bills from being missed during an emergency.
• List beneficiaries: Review investment accounts to ensure the correct beneficiaries are named.
• Review life insurance: Service members automatically receive coverage through Service Members Group Life Insurance, but it is worth checking whether additional coverage is needed.

6. Look Into VA Benefits and Military-Specific Debt Relief

Leaving active duty opens the door to many support programs, especially through the VA. These benefits may not directly erase debt, but they can lower other major expenses and free up money for repayment.

Some helpful options include:

• VA home loans: These loans can offer favorable terms such as no down payment and lower rates, even for some current service members.
• VA healthcare: Many veterans qualify for healthcare through the VA, often without needing a disability rating, and it can work alongside other insurance.
• VA disability payments: A 2024 government report said about 31% of veterans have a service-connected disability rating. Monthly compensation begins at $175 for a 10% rating and continues for life.
• Foreclosure support: Veterans can receive extra help if they are facing foreclosure, whether or not they have a VA loan.
• Housing help for at-risk veterans: Veterans at risk of homelessness may be connected with a navigator who can help identify housing subsidies and benefits.
• Thrift Savings Plan loans: If your TSP balance is at least $1,000, you may be able to borrow from it at a relatively low rate.
• Military debt consolidation offers: Some lenders advertise Military Debt Consolidation Loans, but these are not official government programs. A VA cash-out refinance may be one way to consolidate other debts.

7. Explore Other Sources of Financial Help

The military and the VA are major sources of support, but they are not the only ones available to help service members regain control of their finances.

• Military Relief Societies: Each branch generally has a relief organization that may provide grants or interest-free loans for serious financial hardship.
• One-on-one financial counseling: The military funds independent counselors who can provide personal help in person, online, or by phone.
• Military OneSource: This Defense Department website offers financial courses, referrals to eligible resources, personal finance guides, and more.