As a military member, deployment is a huge factor in military life and deploying can create financial considerations that make paying auto loans challenging. For service members, deployment means a radical rethinking of finances and capabilities.
However, some legal protections and proactive steps can relieve those burdens. One important concept for members to understand is military car loan forgiveness, which offers relief in certain circumstances. This article guides service members on how to deal with their auto loans during deployment.
Legal Protections for Military Families
Service members can use these protections and resources to help them manage their auto loans until they can return to solid ground and manage their duties. The legal safeguards that help protect military members from financial strain while deployed.
The Servicemembers Civil Relief Act (SCRA) is chief, a federal law that relieves military personnel from financial pressure on active service. The SCRA offers several protections specific to auto loans:
- Lease Termination Without Penalty: Deployment may require service members to break a vehicle lease before the end of the term. This protects the dependent(s) listed on the lease.
- Repossession Safeguards: Service members are also protected from being repossessed by lenders without a court order when they break a contract — such as missing car payments — while on active duty.
- Interest Rate Cap: Auto loans are covered under the Military Lending Act (MLA), which sets a Military Annual Percentage Rate (MAPR) at 36% or less (including interest, fees, and other charges). That’s a limit to ensure deployed service members are not facing high loan costs.
Being denied these legal protections would mean service members would be without the protection they need to avoid needless financial strain and refocus on their mission.
Preparing for Deployment: Auto Loan Obligations
Even though the law protects them, military members must be proactive about securing their financial futures while they’re deployed. This can not allow the service member or their family to miss payments, pay penalties, or experience stress.
Service members should let their auto loan lenders know they are headed to service before deploying. This is important so that we don’t get confused about what is being said, and it can start a conversation about payments, payment deferments, and special accommodations, for example. If you are deploying, you may qualify for service member policies from your lenders.
Set Up Automatic Payments
An easy way to ensure you are never late on payments for your car loan is to establish automatic drafts for your monthly payments. Institutions like USAA and Navy Federal Credit Union offer online banking platforms that allow them to manage their accounts remotely and pay recurring bills from overseas.
Explore Deferment Options
Some lenders provide payment deferments to service members deployed. Deferment allows for suspension of payments without impacting your credit score, which can be helpful during deployment. In advance, service members should inquire about this option so that they won’t be surprised.
Review Legal Documents
During deployment, this is the time to review and revise legal paperwork that could affect financial choice. The service member should also make sure that documents, like a power of attorney, medical directives, and wills, are current so a trusted individual can take care of his financial responsibility.
Military Auto Specific Financial Services
Autospecific financial services for military members can make managing auto loans during deployment even easier. USAA and Navy Federal Credit Union not only offer competitive loan terms but also have easy-going ways of handling military matters when it comes to shipping a car overseas.
Also, the Savings Deposit Program (SDP) allows deployed service members to deposit deployment pay at high interest rates. Service members who allocate deployment pay—typically between 2.5% and 10% of their pay—toward auto loan payments or savings can help them reduce their financial burdens and build a safety net.
Financial Consulting Assistance
Personal Financial Managers (PFMs) or Personal Financial Counselors (PFCs) are available at many military installations for financial counseling services.
These professionals help service members make good deployment financial plans for loan management, savings, and debt repayment strategies. Military members can clarify and rely on their obligations while deployed when consulting a financial counselor.
Deployment Savings Opportunities
Personnel who are deployed can receive housing, and they usually get some extra pay and allowances. With these funds, service members can divert payments to make other payments on their auto loans, paying down the principal balance and the related interest more quickly.
If not, they can use the money for other financial goals, including saving for an emergency or investing.
Conclusion
While serving militarily, you face unique challenges in managing your auto loan obligations, but robust protections and resources are available to help lessen the weight. The SCRA and MLA help protect service members by providing legal safeguards.
Combined with proactive financial planning and particular military services, service members can bolster financial stability during extended service. Service members can face the complexity of deployment with confidence and a clear head, with an understanding of their rights and the use of tools like automatic payments, deferments, and financial counseling.
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