SCRA: Cap your pre-service loans at 6 percent

  • Published
  • By Capt. Colin P. Eichenberger
  • 35th Fighter Wing Staff Judge Advocate Office
MISAWA AIR BASE, Japan --  Are you paying more than 6 percent interest on a debt that you incurred prior to joining the service? If so, you may qualify to have the interest rate reduced and in the process save yourself a significant amount of money.

The Service Member's Civil Relief Act (SCRA) offers protection to service members who have had their ability to pay down debts hampered because of their military service. In order to take advantage of this program, the following two criteria must be met:

1. The debt must have been acquired prior to entering active duty (unfortunately student loans are excluded); and

2. You must show that your ability to pay the debt has been materially altered by your service obligation (i.e. your salary has decreased)

If you believe that you meet both of the criteria you can have your interest rate reduced by your creditors to 6 percent. The reduction in interest would be applied to your pre-service debt beginning the day you entered active service and extend until the end of your term of service. Any interest above the 6 percent cap would be forgiven. That means that your creditor cannot simply defer the charges associated with the higher interest rate or accelerate the payment of your balance.

For example, if you have a credit card with a 10 percent interest rate that carried a balance of $1,000 prior to entering active duty service and you meet the two criteria above, you would be eligible to have the interest rate reduced to 6 percent on that $1,000 debt until it is paid off or you leave active duty military service. The credit card company will not be able to defer the payments due on the 4 percent interest rate reduction, charging you for this at some later date, or force you to pay off the $1,000 right away based on your request.

If you would like more information about your protections under the SCRA, please stop by the legal office and pick up our SCRA pamphlet. Don't miss out on the opportunity to lower your pre-service debt.