Service Members Civil Relief Act for Car Loans

Our military families have expanded protections granted to them by the Service Members Civil Relief Act (SCRA). This important law was signed by President George W. Bush in late 2003 to provide additional relief to military families coping with financial stresses associated with deployment.

Help with Payments on Leased Vehicles

Service members that are called to active duty may be able to terminate an existing lease on a vehicle. This can provide substantial relief when you aren't going to be around to drive the vehicle in question.

There are a few provisions that must be met. First, the lease had to be entered into prior to receiving notice of deployment or active duty. Second, you must be called up for at least 180 days. An additional qualification is granted if your orders include a PCS outside the U.S. In that case, even leases signed during active duty may qualify for termination. You have 15 days to return the vehicle following notification.

Help with Payments on Car Loans

Car loans that have finance rates higher than 6% may be adjusted so that no more than 6% is charged during the period of deployment or active duty. The rate reduction is reflected in a new lower monthly car payment.

This is to provide relief to service members so that they can better stay current on their car loans and avoid repossession. Even if you do fall behind, your lender has to first obtain court order before they can repossess your vehicle.

Only loans signed prior to receiving orders are eligible for the lower interest rate. If your family bought a car after you received orders, that loan is not eligible for the 6% rate under SCRA.

To obtain the lower interest rate, notify your lender and provide them with a copy of your orders. You must have technically been materially affected by your new orders. Hardships could include lower pay or higher costs associated with the change.

Lenders reserve the right to request proof that your ability to pay at the current rate has been materially affected. However, many service members find that their lenders are willing to comply with SCRA without requesting information other than a copy of their orders.

If you have questions about SCRA and need legal advice, you should contact your legal assistance center for help.

Don't stand by and let your car payments take over your life. Make sure that you understand the protections that you have under SCRA. Thank you for your service!