Know Your Rights
The SCRA can cap pre-service debt at 6 percent while you serve, and it adds court and property protections. Here is how to use it.
U.S. Army photo by Melissa Buckley, Fort Leonard Wood, Missouri, DVIDS (public domain).
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The Servicemembers Civil Relief Act (SCRA) can cap the interest on debt you took on before you went active duty at 6 percent while you serve. It covers loans like credit cards, car notes, and mortgages that you signed before your service start date. It is not automatic. You send the lender written notice and a copy of your orders, and the lender drops the rate back to your active duty start date and forgives the interest above 6 percent. The cap runs during your service, and for a mortgage it runs one year longer.
Source: DOJ Servicemembers and Veterans Initiative
It is a federal limit that holds the interest rate on your pre-service debt at 6 percent per year while you are on active duty. The law counts service charges, renewal fees, and other fees as interest, so 6 percent is a hard ceiling on the full cost of the loan, not just the base rate. Anything above 6 percent for that period is forgiven, not delayed. The lender erases it instead of adding it back later.
Source: 50 U.S.C. 3937
It covers obligations you took on before your active duty start date. The Department of Justice lists car, ATV, boat, and motorcycle loans, credit cards, home equity loans, mortgages, and student loans. A debt you sign after your service start date does not qualify, because the protection is built for obligations that predate your service, though a new loan you take on during service may instead fall under the Military Lending Act's 36 percent rate cap. For Guard and Reserve members, debt taken on between active duty periods can count as pre-service debt.
Source: DOJ Servicemembers and Veterans Initiative
Send each lender written notice and a copy of your orders. You can mail a letter, send an email, or use the lender's online portal, but include your orders every time. The Department of Justice says you can send the request any time during service or up to 180 days after your service ends, and the cap applies back to the date you were first eligible. List every account and account number you want covered so nothing gets missed.
Source: DOJ Servicemembers and Veterans Initiative
The lender has to forgive the interest above 6 percent, apply the cap back to your first eligible date, and refund any excess interest you already paid. It also has to lower your monthly payment by the amount of interest forgiven, and it cannot speed up your principal to make up the difference. For a mortgage or similar secured debt, the cap runs during your service and for one year after. For other debt, it runs during your service.
Source: DOJ Servicemembers and Veterans Initiative
The SCRA also guards you in court and against losing property while you serve. If a creditor sues you and you do not appear, the court can appoint an attorney and pause the case, which makes a default judgment against you harder to enter. The law also adds protections against foreclosure and against repossession of items like your car for obligations that predate your service, it can require a court order in many cases, and it lets you break a lease early when you get PCS or deployment orders. The CFPB keeps a plain-language rundown of these protections.
Source: CFPB
Does the 6 percent cap happen automatically?
No. You have to notify each lender in writing and include a copy of your orders. Until you do, the lender can keep charging the original rate.
Does the cap cover my spouse's debt?
It covers debt you and your spouse took on jointly, where both names are on the account. An account in your spouse's name alone does not qualify under the SCRA, though a lender can choose to give more than the law requires.
What happens if I refinance or consolidate a covered loan?
You may lose the cap. Refinancing or consolidating during service can create a new loan that started during your service, not before it, which puts it outside the pre-service rule.
When do the interest benefits start?
According to the Department of Justice, the interest rate benefit begins the day your orders to active duty are issued, even though you still have to send notice to trigger it.
Who qualifies for the 6 percent cap?
Active duty members, plus Reservists and National Guard members on qualifying federal orders, and commissioned officers of the Public Health Service and NOAA. State law can offer more.
What if a lender refuses?
You can talk to your installation legal assistance office at no cost, and you can report a violation to the Department of Justice.
VetraFi does not provide financial, investment, tax, legal, or accounting advice. The content provided is for informational purposes only. You should consult your own advisors before engaging in any transaction.
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