There are two basic types of military loans. The most common - installment loans - are cash loans that carry an interest rate. Sometimes, these loans also carry other fees. The other type of loan is a military payday loan. These loans are also cash loans, but a fee is due at the next payday. For example, a servicemember borrows $500 and $550 is due to the lender at the next payday. Often, the servicemember cannot or does not repay the loan on the payday. The loan is rolled over and an additional charge is added to the loan. After a few "rollovers" the loan becomes unmanageable for the servicemember.

Before applying for a military loan we recommend that you first seek financial assistance at your base assistance office or service organization such as the Navy-Marine Corps Relief Society.

If you apply for a military loan there are a couple of things to consider. Generally, you should only apply for a military loan if it is an emergency or near-emergency situation and no other options are available, since most military loans carry high interest rates. Do not get a military loan for "luxury" items such as televisions, DVD players etc. We know of one Marine who obtained a $250 military loan to buy a VCR player and ended up paying a total of $1,200. It's better to save for a couple of paydays and pay cash, than to finance luxury items. If you are unable to save for the couple of paydays, then it is doubtful that you would have been able to afford or payoff the military loan.

Because of the problem of predatory lending on U.S. Military servicemembers, Congress passed the Talent-Nelson Act which imposed a 36 percent APR cap on loans to servicemembers and their dependents. This regulation has effectively ended payday loans to servicemembers. Installment loans are still available from many companies, both online and at brick-and-mortar loan companies near military bases.

For installment loans, Military News Network (MNN) recommends Pioneer Military Loans, a leading military loan provider that is a member of the Better Business Bureau Online Reliability Program.