Loan Rate for Army Reservist
Answer by Jim Bedsole, BOL Guru Guru Bio
Question: We have a loan pending for a customer who we found is in the army reserves and in IRAQ on assignment. We have not made the loan yet, but the question arose that we may have to offer him a lower rate. Can I charge him the normal loan rate or do we have to make it at the rate of 6%?
Answer: SCRA only mandates interest rate relief on credit extended to a servicemember prior to their entry to active duty. If your customer is already on active duty assignment, your interest rate can be whatever the rate for which he/she is willing to contract. The theory behind this is based on the presumption that entry to active duty creates a negative change in financial ability, and loans that were made based on a higher income shouldn't be a burden based on the person's entry to active duty. If the customer qualifies for the credit with his active duty income, then obviously there is no negative financial impact and no need for interest rate relief.
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