VILSECK, Germany — Military personnel in Europe are paying interest rates of almost 20 percent on loans that allow them to travel back to the States at short notice and pay nothing until a month later.
ABC Travel Mannheim’s lead travel agent Mary Akbaba said Monday that each year between 100 and 200 Americans take advantage of Fly Now, Pay Later, an option that allows people to defer payment on airfares and other travel-related costs.
The offer, which is only available to U.S. servicemembers, retirees and Department of Defense civilians, relies on a finance company called U.S. Military Loans.
For Fly Now, Pay Later, the U.S.-based company charges 19.95 percent interest on amounts greater than $500 to be repaid within 12 months, according to Gene Model, associate manager for the European office of U.S. Military Loans.
ABC Travel also charges Fly Now, Pay Later customers a "handling fee" that varies depending on the amount borrowed.
For a $1,000 airline ticket, for example, the handling fee would be $80 if the ticket was paid over 12 months, Akbaba said.
The Fly Now, Pay Later rate is more than double the 8.42 percent minimum interest rate charged by DOD Community Bank on its "Signature" loans, which can be used to cover travel, according to the bank’s Web site.
Model said a Community Bank loan was the best option for people wanting to finance an overseas trip.
"But these days not everybody is getting loans from the Community Bank. They are more nervous because of the credit crunch," he said.
A bank will only loan to people with a high enough credit score, Model said.
U.S. Military Loans take other factors into account and will loan to people with lower credit scores if they have showed an intention to pay off debt, he said.
Spc. Haley Neff, 22, of Bridge City, Texas, who was at Grafenwöhr’s on-post SATO travel shop on Monday, said her friend is using Fly Now, Pay Later to go back to the States.
"I think it’s awesome. We don’t make a lot of money. Sometimes leave is unexpected and you don’t know you are going to go," said Neff, who was booking a holiday in Italy.
"If you buy a ticket online and make payments with a credit card, it is not impacting your credit at all," said the 23rd Ordnance Company soldier.
Another soldier in the SATO shop, Cpl. Megan Nugent of Loxahatchee, Fla., was looking at options for midtour leave on an upcoming deployment to Iraq.
Nugent, who is thinking about a trip to Australia or New Zealand, is less enthusiastic about Fly Now, Pay Later.
"It sounds like a good idea because we don’t make much money but I’d be put off by the interest rate," she said.
Akbaba gave the example that for a $1,336 return flight from Germany to Hawaii, a person would make 12 monthly payments of $123. In the end the trip would cost $1,476.
The ABC Travel Web site, www.abctravel.de, states that Fly Now, Pay Later monthly payments on a flight to Hawaii would be just $88 but Akbaba said that figure is based on getting a ticket price that is not available at the moment.
If the traveler decided to take out a signature loan with Community Bank, however, that same trip, at 8.24 percent interest, would cost $1,396. That’s a savings of $80. If you’re making a reservation for a family of four, the savings increases.
Sylvia Selbert, a travel agent with ABC Travel in Vilseck, said she gets daily inquiries about Fly Now, Pay Later.
"We are the only German travel agent that provides this service. Every day we have e-mails asking about Fly Now, Pay Later. I had a lady ask me yesterday," she said.
The loan may be used to pay for any travel-related expense including package deals, hotels and rental cars, she said.
To qualify customers must book a flight and provide ABC with a leave and earnings statement and a form signed by a first sergeant, she said.
"When you put in the paperwork for the flight it takes two to three days to get an answer but sometimes they get it within 24 hours," she said.
The plan is popular with soldiers short of money when they get a chance to go on leave, she said.
