As Memorial Day passes and we reflect on the sacrifices made by those who served, it is equally important to recognize the major life transition that awaits current active duty servicemembers preparing to leave the military. This change brings many challenges, and one of the most overlooked—but critical—areas is personal finance.
From understanding military-specific protections to building a solid civilian budget, taking the right steps now can prevent future debt, credit issues, or even legal trouble. One essential tool to know before separation is the Servicemembers Civil Relief Act.
Understanding the Servicemembers Civil Relief Act (SCRA)
Key Benefits and Limitations
The Servicemembers Civil Relief Act (SCRA) is a federal law created to help reduce financial pressure on active-duty military members. It provides valuable financial protections such as capping interest rates on existing loans, pausing certain legal proceedings, and limiting actions like eviction or repossession. These safeguards are meant to give servicemembers peace of mind while focusing on their duties, and they can make a significant difference in managing credit, housing, and debt during active service.
Are SCRA Protections Automatic?
Many SCRA benefits end when you leave active duty, and they don’t continue automatically. To keep protections like reduced interest rates or delayed legal actions, you often need to notify creditors and submit documentation within six months after service separation. Acting early can help you avoid unexpected financial setbacks on your transition to civilian life.
What are the requirements for a SCRA notice?
To take advantage of SCRA protections, like the 6% interest cap, you must submit a written notice to your creditor along with a copy of your military orders to invoke SCRA protections. This must typically be done within 180 days of ending active duty for the interest rate reduction to apply retroactively. Notifying creditors of your discharge is just as important to avoid miscommunication or expired benefits.
What is the 6% SCRA law?
One of the most widely recognized benefits is the 6% interest rate cap. Under this law, servicemembers can request that interest rates on debts incurred before active duty—like credit cards, auto loans, or mortgages—be reduced to no more than 6% annually. This cap applies only during the period of active duty and does not automatically continue after discharge.
Who qualifies for SCRA relief?
To qualify for SCRA relief, you must be an active-duty member of the Army, Navy, Air Force, Marine Corps, or Coast Guard. Members of the National Guard or Reservists called to active duty for more than 30 days also qualify. Some SCRA protections may extend to spouses and dependents under specific circumstances.
Take advantage of your SCAR Protections
Leaving military service is a major life change. Here are three financial moves you should make to set yourself up for success:
1. Check Your SCRA Protections Before Discharge
Review the protections you’ve received under the SCRA, such as reduced interest rates, protection from foreclosure or eviction, and postponed civil obligations. After separation, you may lose these benefits unless specific steps are taken.
2. Get Ahead of Your Credit Situation
Even with SCRA protections, military life can still affect your credit. Before separating:
- Review your credit reports from Equifax, Experian, and TransUnion for errors.
- Dispute any incorrect items.
- Consider secured credit cards or becoming an authorized user on a trusted account to build or rebuild credit.
3. Create a Financial Exit Strategy
Plan ahead by organizing your finances and anticipating a possible income gap during your transition to civilian life. Key steps include:
- Listing out all debts and monthly obligations
- Creating a realistic civilian budget
- Avoiding new financial commitments (e.g., loans, large purchases) until your income stabilizes
Discipline Isn’t Just for Service
You served your country with courage and discipline, qualities that are just as essential in managing your personal finances. By understanding the SCRA requirements & time limits, acting on your financial obligations, and setting a budget for your new life, you can make your civilian transition smoother and more secure.
Thank you for your service, and here’s to a
strong and steady financial future ahead.
The information provided in this blog article is for informational purposes only and should not be construed as legal advice. It is not intended to create an attorney-client relationship.
