The challenges of veterans re-assimilating into society once their tour of duty is over or their service concludes are well documented. Aside from post-traumatic stress disorder (PTSD) that many former members who experienced trauma experience upon returning home experience, there’s also a general struggle to find work, maintain relationships and perform various other aspects of civilian life.
And despite the passage of the 2006 Military Lending Act, another struggle that many veterans have upon returning home is finding credible lenders.
Yes, there are many predatory lenders out there who attempt to take advantage of a veteran’s potential for having limited knowledge of lending to dupe them into high-interest loans and hidden fees on vehicle, home, and other financed purchases. In fact, these predatory lenders often groom military members early on in the process, soliciting them at bases and camps in an attempt to build trust and earn their business upon discharge.
Here are some examples of loan terms that veterans have been duped into agreeing to:
- Payday loans with an interest rate up to 400 percent. (Fees typically run anywhere from $10 to $30 for every $100 borrowed.)
- Auto loans with interest rates as high as 20 percent. (The average auto loan rate is 4.21 percent.)
This is concerning, especially when you consider the sacrifice that military members are making for their country when they enlist in the armed forces. And while treatment of veterans has been a hot topic for decades now, you would think that something like predatory lending would be something they’d be protected from.
How to Avoid Predatory Lenders
Unfortunately, even with the Military Lending Act, predatory lending has deeply affected American veterans. Here’s a look at some ways that veterans and active military members can avoid getting trapped into high-interest loans:
- Be proactive: Many predatory lenders smell blood in the water when they think people are unaware of lending basics. They take it as an opportunity to educate the consumer in an effort to come across as the industry leader, then hook them onto their loans. This can be the case for military members re-assimilating into civilian life, as they may not know much about lending. On this note, it’s always best to be proactive and learn the basics of lending so you can better detect whether or not you’re getting ripped off. Many community colleges also offer complimentary classes on lending basics to help the general public, let alone veterans, sniff out the good from the bad.
- Know what can you afford: Knowing what you can afford is another big factor in taking out any loan. When you’re shopping for a loan, whether you believe the lender is ethical or unethical, always be sure that the monthly bill you’ll pay is within your budget. Also make sure that this bill includes any additional fees.
- Shop around: Don’t just settle on one lender and go with what they’re offering, think of shopping for a loan like shopping for any other big purchase — you want to get the best price on it. And when it comes to loans, the best price is reflected in interest rates. The lower the interest rate, the less you’ll pay on the loan in the long term. Follow the rule of three and shop around with at least three different lenders. Additionally, be very weary of any lender that is pursuing you for your business, especially if this pursuit becomes persistent. If it seems to good to be true, it probably is too good to be true. That rule applies here too. If a lender is pursuing you and promising all kinds of benefits, know that there’s likely to be a catch somewhere along the line.
While the aforementioned is a great reminder for military members who are looking to secure a loan, it’s also a great general reminder for anyone and everyone. Don’t fall into the trap of a predatory lender, do your due diligence and you’ll come away much better for it.