7 things active-duty military should know about debt and finances

Being in the military means you’re used to tackling anything. You have the discipline to overcome sticky challenges by getting creative with your solutions and sticking with them for the long haul. 

That skill set doesn’t just apply to your work. It applies at home, too, especially for your finances. And it’s good to know there are lots of programs that could help you on your journey. You don’t have to go it alone when others have your six. 

Freedom Debt Relief takes a look at seven debt relief and financial support options that all active-duty members should know about. 

Key Takeaways:

• The Servicemembers Civil Relief Act and the Military Lending Act give military members many debt protections.
• The military provides access to financial and legal counselors who can give you one-on-one support in making sense of your options.
• If possible, avoid defaulting on your debts—you could lose your security clearance.

1. Know Your Rights Under the Servicemembers Civil Relief Act (SCRA)

Uncle Sam wants to make sure you can devote yourself fully to service when it’s needed. That’s why Congress passed the Soldiers’ and Sailors’ Civil Relief Act (SSCRA) on the verge of World War II. Today, it’s known as the Servicemembers Civil Relief Act (SCRA).

The SCRA is important because it gives you a lot of protection for debt you brought with you into service. When you pair it up with the Military Lending Act, which we’ll chat about below, it helps make sure all the debt you have while on duty—whether you got it before you joined up or after—doesn’t hinder your ability to serve the nation. 

Here are some of the ways the SCRA helps with debts you brought with you into service: 

• 6% interest rate cap: You can ask your lenders to lower the interest rate on your debts to 6%. That’s the difference between a $125 payment and a $75 payment, if, for instance, you’re carrying $5,000 on a credit card at 18%. For mortgages, this applies for a year after you leave service, too. 
• Foreclosure and repossession postponement: If you fall behind on secured debts backed by something you own (like a mortgage or auto loan), your lender can’t foreclose or repossess without a court order. For your home, this extends for nine months after you leave service.  
• Eviction prevention: Unless you’re paying rent above a certain threshold that changes regularly (currently $10,542.60 in 2026), you and your family can’t be evicted from your home without a court order.  
• Protections in civil court: If you’re involved in any civil court proceedings, like child custody or divorce cases, you can request an automatic 90-day hold if you can’t appear in court because of your military service. You also can’t be subject to default judgments if you’re unable to appear in court to defend yourself, like when you’re deployed.  
• Life insurance continuity: If you had a life insurance policy when you entered service, your insurer can’t end your policy, charge you higher rates, or limit your coverage just because you’re now a soldier.  
• Lease and utility contract breakage: If you’re reassigned to another duty station for longer than three months, you can generally break leases you’ve signed without any penalty.  

There are some terms and conditions you need to meet to claim many of these protections, such as providing a copy of your military moving orders in some cases. You could also lose these protections if you refinance your debt or take out a debt consolidation loan, since then it’s technically not a pre-service debt any longer. 

It’s a good idea to reach out to your base’s legal aid office for free guidance.

2. Understand the Military Lending Act (MLA)

The Military Lending Act is a federal law that protects active military members, their spouses, and dependents from predatory lending practices. Authorized in 2006, its main purpose is to keep finances safe from lenders and lending practices that may take advantage of service members and their families. 

Note that the MLA doesn’t cover as many types of debt as the SCRA—secured debts, like a mortgage, auto loan, or RV loan, aren’t covered by the MLA. But most types of unsecured debts that you take on while you’re in the service are covered, including payday loans, credit cards, and personal loans.

Here’s a brief overview of what the law says.

• 36% interest rate cap: It is illegal to charge active duty military members and their covered dependents more than a 36% annual percentage rate. This includes finance charges, credit insurance costs, and other fees, too. 
• Military Annual Percentage Rate disclosure: Since the MLA calculates your loan costs a bit differently, lenders are required to disclose this number as the “Military Annual Percentage Rate” before you agree to take on a new debt.  
• No prepayment penalties: Those covered under this law can pay back part or all of their loans early without facing prepayment penalties. 
• No waivers of legal rights: Your lender can’t make you sign anything that waives your SCRA rights, or make you agree to mandatory arbitration to get approved for financing. 
• No mandatory allotments: The military allows you to set up automatic payments directly from your paycheck, before it hits your bank account. But lenders can’t require you to do this to get approved for a loan. It’s your choice.  

As with the SCRA protections, there could be loopholes to watch out for. Reach out to your base’s legal aid office for free support.

3. How Debt Could Affect Your Military Security Clearances

In some ways, the military holds soldiers to a higher standard than the civilian world. What you do in your personal life impacts your career, and vice-versa.

That’s why the military keeps a close eye on 13 Adjudicative Guidelines when making security clearance decisions, one of which includes “financial considerations.” Most soldiers need security clearances for their job, making this extra-important. 

In the military’s view, managing your finances well shows you’re able to handle the nation’s secrets. Soldiers who manage their debt well also have lower stress levels, and are less likely to adopt risky behaviors, both of which contribute to a strong fighting force. 

By October 2021, the Department of Defense had enrolled all of its security clearance holders in continuous vetting. Continuous vetting uses automated checks of government and commercial records. It's replacing the periodic reinvestigations that used to happen every five years for a top secret clearance and every 10 years for a secret clearance. The government has expanded these checks to include credit reports and suspicious financial activity. A missed payment or a debt in default could come to light long before a scheduled reinvestigation would have caught it.

Tell your security manager about money problems before an automated alert does. If you fall behind on your debts, you could be flagged for a security clearance review. You get a chance to explain what happened, but if your case reviewer isn’t satisfied, they could pull your security clearance. And that could lead to a downgrade in your pay or, in extreme cases, being discharged from the military. 

You can appeal this decision. And by taking steps to get out of debt, you might get your security clearance reinstated. 

4. Manage Your Money

It can be stressful to deal with past-due rent and utility payments, credit card debt, and other financial issues while you’re home, and especially while you’re deployed. So it’s a good idea to keep your debt to whatever minimum you can. These strategies could help you do just that.

• Set a budget: A budget is a spending plan based on your unique income and expenses. If you create a budget (and stick to it), you’ll have a better understanding of how much it takes to cover everything you need and want. 
• Establish an emergency fund: A financial emergency can hit when you least expect it. With a solid emergency fund, you’re better able to cover an unexpected car repair, family expense, or other expenses that may come your way. 
• Make sure you take advantage of military discounts: The PX isn't the only place you can find a great deal. More companies offer discounts to military personnel than you might realize. The next time you make a larger purchase or even buy insurance, find out if there are any military discounts.  
• Save for retirement: It can be difficult to prioritize retirement savings while you’re on active duty, but your pension may not be enough to fully support retirement. Compound interest is the key to a healthy nest egg, so look for money in your budget to put toward additional retirement savings. Open a Thrift Savings Plan—similar to a civilian 401(k) plan—for tax-deferred investments.

5. Prepare for the Worst

You could be almost anywhere when an unexpected situation like the coronavirus pandemic occurs. So prepare for the worst when you are away from family, and make sure your finances are in order. Start by taking these steps.

• Draft your will: A will is a legal document that outlines how your assets will be distributed after your death. If you have complicated assets, you can work with a civilian estate planning attorney to ensure your will, trust, power of attorney, or other plan is ideal for your specific situation. For a simpler estate plan, your JAG can help you set up a will or other planning instrument. 
• Set up auto pay: Set your bills up with automatic payments so you don’t have to worry about how they’ll get paid in an emergency. 
• Add beneficiaries on your accounts: Take a look at all of your investment accounts, and make sure beneficiaries are listed so the accounts get passed on to the right people. 
• Check your life insurance: Military members get life insurance automatically through Service Members Group Life Insurance (SGLI). Review your coverage and determine whether you need more. 

6. VA Benefits and Military-Specific Debt Relief Programs

You learn a lot of useful skills in the military. When it comes time to leave, you also have many support options, especially through the VA system. Unfortunately, your benefits don’t provide quite as much support for your debts as when you were on active duty.

Even so, you may be surprised by how much financial support is available to veterans, especially if you’re going to school, buying a home, or receiving healthcare. Lowering your costs in those areas could help free up cash to tackle your debt. 

Here are some programs for veterans that could help:

• VA home loans: If you’re looking to buy a home, even if you're still in the service, a VA home loan offers many benefits, like lower rates and no down payment.   
• VA healthcare: Most veterans are eligible for healthcare through the VA system. You don’t necessarily need a disability rating to qualify. You can use it with other health insurance, and it covers most medical care, whether it’s related to service-related injuries or not. 
• VA disability payments: Some 31% of veterans have a service-connected disability rating, according to a 2024 government report. You’re entitled to lifelong monthly payments to compensate you for your losses, with compensation starting at $175 for a 10% disability rating. 
• Home foreclosure support: Veterans are eligible for extra help in dealing with home foreclosure, whether they have a VA loan or not.  
• At-risk veteran housing support: If you’re a veteran at risk of homelessness, the VA can assign a navigator who can help you identify and claim any housing subsidies and benefits you might qualify for from smaller programs.  
• Thrift savings plan (TSP) loans: If you have at least $1,000 in your TSP (the military’s version of a retirement savings plan), you may be able to take a loan out from yourself at a low interest rate.  
• Debt consolidation loans for military members: Some lenders advertise “Military Debt Consolidation Loans (MDCLs),” but these are not official government programs. You can, however, do a VA cash-out refinance to consolidate your other debts. 

7. Additional Resources and Organizations for Military Financial Help

The military and the VA make a powerful team when it comes to providing financial help for those who serve our nation. But they’re not the only ones who could help you sail through getting your debt back on track. 

• Military Relief Societies: Most of the military branches have a military relief organization. If you’re seriously struggling with financial problems, they may be able to offer help in the form of grants or interest-free loans. 
• One-on-one financial counseling: The military pays for independent financial counselors you can access for one-on-one support and help, many of which are located on-site at your duty station. You can also talk to someone online or over the phone. They can help you find ways to solve most debt problems.  
• Military OneSource: This website, operated by the Defense Department, offers a wide range of financial courses on specific topics, referrals to all the resources you’re eligible for, personal finance guides, and more. 

This story was produced by Freedom Debt Relief and reviewed and distributed by Stacker.