I first noticed this in one of my Lending Club accounts about a year ago. It was a C-grade loan that went from 14% and was suddenly paying 6%. I thought it must have been a mistake but when I did some investigating I discovered this 6% rate was indeed correct. How can that be?
I didn’t think much more about it because it was an isolated incident that hasn’t happened since. Then yesterday, I noticed this tweet from Michael at Nickel Steamroller. There are several low grade loans for sale right now on Folio with a 6% interest rate including this E-grade loan. What gives?
Active Duty Military Can Only be Charged 6% While Deployed
These loans didn’t start out at 6%. They were normal loans with an interest rate commensurate with the credit risk. But there is a law called the Servicemembers Civil Relief Act (SCRA) that states that when active duty military are deployed they can only be charged a maximum of 6% on any debt incurred prior to their deployment. Here is the pertinent information. This act: [click to continue…]
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