Servicemembers should beware of easy money
April 10, 2005
KAISERSLAUTERN, Germany — U.S. troops in Germany seeking fast cash and more lenient credit requirements may be tempted to patronize loan companies often located just outside the gates.
But one military financial counselor says troops should be careful because the high interest rates and revolving credit often offered by such “second-chance” loan companies may leave servicemembers more strapped for cash than before.
“One of the things I tell people is, if the bank or credit union isn’t going to talk to you because of bad credit, be careful about going outside the gate,” said Bill Triplett, a financial counselor with the Family Support Center at Spangdahlem Air Base, Germany.
Loan companies such as Omni Military Loans and Pioneer are based in the United States. Representatives said their branches in Germany are subject to the regulations of the American state in which they are registered — New York and Nevada, respectively.
Servicemembers are only given loans they qualify for, and at a rate of return they deserve given their past credit history, they said.
Those who don’t qualify, however, often have a second chance to get the money.
Pioneer offers free financial management counseling to applicants whose loans are denied, said Mark H. Wiggins, a spokesman for the lending institute with an office just outside the military base gate in Hanau, Germany.
Once that counseling is completed, the company will reconsider the loan application, Wiggins said.
Pioneer and other loan company officials maintain that obtaining a loan outside the gate is pretty much the same as getting one at an on-base bank or credit union. Triplett, however, said there are key differences.
In some cases, interest rates at off-base loan companies are as high as 25 percent or 35 percent, he said.
An employee at ABC Insurance near Kaiserslautern that also offers Omni loans, said her company does not keep statistics about the average loan amount, interest rate and payment schedule offered by the company.
“Our main income is through insurance,” Doris Miller said. “For us, it is not worth it to keep those statistics, and I’m not certain about those numbers. I don’t like to give out information I’m not certain about.”
Banks and credit unions on base have application forms, credit checks and different interest rates based on past credit history. Off-post lending institutions, like Pioneer or Omni, said they do the same.
But off-base loan companies cater to troops in other ways as well, the Pioneer spokesman said. In some cases, an applicant can get approved for a loan in a couple of hours.
However, unlike quick-cash offices that stand just outside the gates of installations in the United States and the Pacific, German law bars such loan companies from offering high-interest payday loans without credit history checks, Wiggins said.
He said potential clients should always investigate loan rates from several agencies before signing on the dotted line.
“Not everyone downtown is trying to rip people off,” Wiggins said.
He said Pioneer also has a 30-day grace period after issuing a loan. If a troop finds a better interest rate in that time, the loan will be terminated.
“Shop around and be smart about it,” Wiggins said. “They don’t want to put themselves at risk financially. Troops already put themselves in enough risk.”
Triplett, the Spangdahlem financial counselor, said he wishes the military would not cooperate with such lenders when the companies call to confirm the employment of servicemembers applying for the loans.
For Army and Air Force servicemembers in financial trouble, Triplett encourages on-base assistance.
“If you’ve got some financial problems, rather than putting your neck on the line and borrowing money at an exorbitant rate, go see the financial counselor,” he said.