Military personnel have several sources for obtaining military loans. Banks and credit unions are one source, but these traditional financial institutions are often reluctant to lend to people serving in the military because potential borrowers from the military tend to be younger and without established credit histories, or already have bad credit. Payday loan lenders are another source, however, an October 2007 DoD regulation imposed a 36 percent APR cap on military loans to military personnel and their families. This regulation has effectively put military payday lenders out of the military loan business, as their rates were sometimes 400% or more. Most military loans, however, are made by financial companies, such as Pioneer Military Lending, that specialize in lending money to military servicemembers. Another, often overlooked source, are military base assistance offices and organizations that offer financial and other assistance to military servicemembers and their families. These loans tend to be smaller and are designed to help military servicemembers out of financial predicaments.

Military servicemembers cite a number of reasons for getting a military loan. Among the reasons are unexpected expenses such as auto repair, travel expenses, debt management and the consolidation of other loans, the purchase of big-ticket items like televisions, stereos, computers, furniture and appliances, and other items popular with the demographics of younger military people - like specialized tires and rims.

The military loan industry has suffered in perception because of the abuses of some loan companies and many payday lenders that charged exorbitant fees and interest rates. Some unscrupulous lenders have taken advantage of borrowers' youthful inexperiences in handling financial matters, and have trapped borrowers in a downward spiral of debt. This was particularly true with payday loans, loans that were due the next payday. If the borrower was unable to pay, the loan was rolled over with additional fees and interest. After several paydays, the borrower would be in a financial hole, unable to dig themselves out.

As a result of these abuses, the US military became concerned about the industry and its effects on servicemembers' readiness. This resulted in the 2007 DoD regulation. In addition, the US military has taken steps to educate servicemembers about the dangers of high-interest and high-fee military loans, as well as other financial considerations.

Nevertheless, military loans from financial companies remain popular, in part because of the continued reluctance by banks and credit unions to lend to military servicemembers. Military servicemembers are in most ways no different from their civilian counterparts when it comes to finances. Military people sometimes need loans too! (Autos need repairs, for example, whether owned by civilians or military.) And when used responsibly, military loans can be a useful tool in helping military personnel meet their financial situations.

Here are a few tips if you are considering applying for a military loan. First, determine if you really need a military loan. Military loans should only be used as a last resort and not for the purchases of big ticket items. If you really want that new LCD TV, save your money for a few paydays and then buy it. You'll save a lot of money on interest and fees. If you're unable to save enough for that big ticket item, then you probably wouldn't have been able to afford it anyway, much less a military loan that would only cost you extra in interest and fees.

Second, determine the best place for you to apply for a military loan. Inquire first with your base assistance office, or organization that assists servicemembers, such as the Navy-Marine Corps Relief Society. Inquire next with your local bank or credit union. Many military bases have banks or credit unions that specialize in serving the military community, and some of these banks or credit unions may be more inclined to lend to military personnel than financial institutions unfamiliar with the financial needs and resources of military members. Next, inquire with financial loan companies that specialize in lending to military personnel. We recommend Pioneer Military Loans.

Third, after finding a lender, determine exactly what fees will be charged, the interest rate, and the length of the loan. Add this all up to determine your true cost of the money you are borrowing and then decide if the loan is worth it and if you will be able to pay it back. If successful in obtaining a military loan, pay it back according to the contract, or earlier if possible.

Overall, military loans can be a great resource if used responsibly and only when absolutely needed. And they can be a curse if used irresponsibly. So use caution and use military loans wisely. You'll be glad you did at some point in the future.