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Soldiers fighting financial battles, too

Apparently some of our service personnel are losing this skirmish.

And Uncle Sam is collateral damage.

The Associated Press reports that these troops are being barred from overseas duty because they are so deep in debt that they are considered security risks. According to the AP, Pentagon officials believe that financial problems can distract servicemen and women from their duties or make them vulnerable to bribery and treason.

Some of the reasons for the debt overload: a lack of education and experience in handling personal finances, reckless spending by soldiers excited to make it back home after overseas duty and the profusion of "payday lenders" who target military personnel.

You can read the full AP story here.

At least there's a little bit of good money news for members of the military. The pay raise mentioned in this earlier post is now reality. You can get the details on the bill signing in this story from Military.com.

Payday lenders pose problems for many: Men and women in uniform are ideal targets for companies looking to make quick, and big, money cashing workers' checks. The Center for Responsible Lending has a special section dedicated to payday lenders and the military.

But thousands of others, especially those who live from paycheck-to-paycheck, often turn to these "services" for cash. You've seen the businesses in strip malls, generally in poorer neighborhoods. Unfortunately, the folks who need the cash advance soon find the price of that emergency loan puts them in a bigger money mess.

Basically, a payday loan is a cash advance in which the worker pays a fee for money pledged against a future paycheck. The problem: Some borrowers find it's way too easy to get sucked into a cycle of recurring payday loans and associated fees.

When all the numbers are added up, the payday advance fees essentially translate into an incredibly high interest rate on short-term loans. In many cases, borrowers find they eventually pay more in fees than they borrowed, much like the problem faced by folks who never pay off their credit card balances and watch the interest charges outpace their actual charges.

The CFRL has a good overview of the process and pitfalls. This Consumer Affairs story has the scoop on state efforts to crack down on these companies.

Empty_pocket_left Emergency money alternatives: We've all been in a financial crunch at some point in our lives. But rather than compound debt difficulty by taking out a costly short-term loan, consider these options first.

Call your creditors -- Deal directly with those you owe. You might be pleasantly surprised to find that many creditors will work with you to restructure your payment schedule. Some will even negotiate partial payments.

Talk to the boss -- Some employers will give workers paycheck advances. This is truly an advance, not a loan, so you won't owe any interest.

Explore assistance programs -- Sure, it's hard to ask for help from strangers, but sometimes it's more preferable than sinking deeper into debt. Many community, church and government organizations provide emergency assistance. The federal Low Income Home Energy Assistance Program, for example, helps eligible households facing in a weather-related heating or cooling crisis.

Contact a credit counselor -- A credible consumer credit counseling agency can help you work out a debt repayment plan. More importantly, these groups can help you develop a budget so you can climb out of the debt abyss and start building a better financial foundation.

Unfortunately, there are unscrupulous credit counselors out there. Make sure you choose one that wants to help you learn how to manage your money, not just collect a fee to rearrange your debt.

The National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies can help you locate a reputable counselor.


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