The Military Lending Act: What It Means for Your Loan
| Cost cap | 36% MAPR on covered credit |
|---|---|
| Who's covered | Active-duty members and covered dependents |
| Not covered | Veterans and retirees for new credit |
| Rule | 32 CFR Part 232 (Department of Defense) |
| Status check | DoD MLA database or credit report indicator |
What the MLA does
The Military Lending Act is a federal law, carried out through Department of Defense regulations at 32 CFR Part 232. It sets a cost cap on most consumer credit offered to covered borrowers and bans certain contract terms. Lenders, including those in our network, must follow it.
If you're not a covered borrower, such as a veteran, a military retiree, or a family member who isn't a covered dependent, the MLA doesn't apply to new credit you take out, and you can request a loan through our form like any other applicant.
The 36% MAPR cap
Lenders can't charge covered borrowers more than a 36% Military Annual Percentage Rate. MAPR is broader than the standard APR. It includes:
- Finance charges (interest and fees)
- Credit insurance premiums
- Add-on credit-related products sold with the loan, such as debt cancellation contracts
- Certain other fees, such as application or participation fees
Because of this cap, many short-term lenders don't offer single-payment loans to covered borrowers. Longer-term personal installment loans are more commonly structured to fit within it.
Worked example: what fits under the cap
A $2,000 installment loan over 12 months at a 36% rate with no extra fees works out to about $200.92 a month, or about $2,411.09 in total. That is the ceiling, not a typical rate. If the lender also charged an application fee or sold credit insurance with the loan, those costs would count toward the MAPR, so the interest rate would have to be lower for the all-in cost to stay at or under 36%. Your lender must give you the MAPR disclosure before you sign. Use the personal loan calculator to test other amounts and terms.
Who is a covered borrower
Under 32 CFR 232.3, you're a covered borrower if, when you take out the credit, you are a covered member or a dependent of one:
- Covered members: members of the armed forces on active duty under orders that don't specify 30 days or fewer, and those on Active Guard and Reserve duty.
- Dependents: spouses and certain other dependents defined by federal law, such as qualifying children.
Status is judged when you become obligated on the credit. If you later leave active duty, new credit isn't covered, but loans you took while covered keep their MLA protections.
Lenders typically confirm status through the Department of Defense's MLA database or a covered-borrower indicator in a credit report from a nationwide credit bureau.
What credit the MLA covers
The regulation covers consumer credit for personal, family or household purposes that has a finance charge or is payable in more than four installments. That generally includes payday loans, vehicle title loans, installment loans, and overdraft lines of credit.
Generally excluded:
- Residential mortgages and other credit secured by a dwelling
- Loans expressly to buy a motor vehicle and secured by that vehicle
- Loans expressly to buy personal property and secured by that property
A loan secured by a car you already own (a title loan) is covered. A loan to buy a car, secured by that car, is not.
Contract terms the MLA bans
Under 32 CFR 232.8, a lender generally can't:
- Roll over or refinance its own consumer credit to the same borrower, with limited exceptions
- Require you to waive rights under state or federal law, including the Servicemembers Civil Relief Act
- Require arbitration or impose unreasonable legal-notice requirements
- Use a check or access to your bank account as security, with narrow exceptions
- Use your vehicle title as security (banks, savings associations and credit unions are excepted)
- Require a military allotment as a condition of credit
- Charge a prepayment penalty
Under 32 CFR 232.9, a contract that violates these rules is void from the start.
Step by step: getting a loan as a covered borrower
- Confirm your status. If you're unsure whether you or your spouse count as covered, check with your unit or personal financial counselor, or look yourself up in the DoD's official MLA database.
- Decide on an amount and term. Installment loans spread repayment over months, which makes it easier for a lender to stay within the 36% MAPR.
- Gather your documents: government ID, your most recent Leave and Earnings Statement (LES) or other proof of income, and your checking account details.
- Apply and answer status questions honestly. Lenders verify status on their own.
- Read the MLA disclosures. You should see the MAPR and a description of your payment obligation, both in writing and orally.
- Sign only when the payment fits your budget. You can repay early without a prepayment penalty.
Ready to start? See if you qualify — the form takes about 3 minutes and there's no obligation.
MLA vs. SCRA
| Military Lending Act | SCRA | |
|---|---|---|
| When it applies | Credit taken out while you're on active duty (or a dependent) | Mainly debts taken out before active duty |
| Main protection | 36% MAPR cap and banned contract terms | Includes a 6% interest cap on pre-service debts during service |
The two laws work alongside each other, and a lender can't make you waive SCRA rights.
Common mistakes to avoid
- Assuming veterans are covered. The MLA protects new credit only while you're a covered member or dependent.
- Overlooking add-ons. Optional insurance or debt-protection products count toward the MAPR; you can decline them.
- Agreeing to an allotment because you think it's required. A lender can't make an allotment a condition of credit.
- Forgetting state law. The MLA sets a federal ceiling; your state may have its own limits too. See personal loan rates by state.
Applying for a loan as a military family
Answer status questions on any application accurately. Covered borrowers are protected by law no matter what, and lenders check status independently. If you're a covered borrower, a personal installment loan is usually the type of loan that fits MLA rules. Your lender shows the exact rate and terms before you sign.
If you're a veteran, retiree or otherwise not covered for new credit, all loan types offered in your state through our network are open to you, including payday and title loans. Our form is free, takes about 3 minutes, and there's no obligation to accept an offer. See if you qualify.
Frequently asked questions
What is the Military Lending Act 36% cap?
The MLA caps the Military Annual Percentage Rate on most consumer credit to covered servicemembers and dependents at 36%. MAPR includes interest, finance charges, credit insurance premiums, add-on products like debt cancellation contracts, and certain fees such as application fees. It's a broader measure than the standard APR.
Does the Military Lending Act apply to veterans?
Generally no. The MLA protects people who are covered borrowers when they take out the credit: active-duty members, including those on Active Guard and Reserve duty, and their covered dependents. Veterans and military retirees aren't covered borrowers for new credit, though loans taken out while covered keep their protections.
Does the MLA apply to payday loans and title loans?
Yes. Payday loans and vehicle title loans are generally covered consumer credit. Lenders can't charge covered borrowers more than 36% MAPR, and most lenders also can't take a vehicle title or bank account access as security. For covered borrowers, a personal installment loan is usually the better fit.
Does the Military Lending Act cover spouses?
Yes. Spouses of covered members are covered dependents, along with certain other dependents defined in federal law. Their consumer credit gets the same 36% MAPR cap and the same protections against banned terms such as mandatory arbitration, required allotments and prepayment penalties.
How do lenders know if I'm covered by the MLA?
Lenders can check the Department of Defense's MLA database using your name, date of birth and Social Security number, or rely on a covered-borrower indicator in a credit report from a nationwide credit bureau. A check made at application, or within 30 days before, is conclusive for that transaction if the lender keeps a record.
Can active duty military get a payday loan?
The MLA doesn't ban payday loans outright, but it caps the cost at a 36% MAPR for covered borrowers and bars using a check or bank access as security, with narrow exceptions. Because of that, many short-term lenders don't offer single-payment loans to covered borrowers. A personal installment loan is the more common fit, and you can request one through our form.
Can a lender require a military allotment to repay a loan?
No. Under 32 CFR 232.8, a lender can't require a military allotment as a condition of extending credit to a covered borrower. You can choose to set one up yourself if it suits you, but it can't be mandatory. Ask the lender which other payment methods it offers, and pick the one that matches your pay schedule.
Sources
- eCFR — 32 CFR Part 232 (Limitations on Terms of Consumer Credit Extended to Service Members and Dependents)
- 10 U.S.C. 987 — Terms of consumer credit extended to members and dependents