What is an Army Emergency Relief loan?

Female soldier talks with a financial counselor about an AER loanImage: Female soldier talks with a financial counselor about an AER loan

In a Nutshell

If you’re facing an unexpected expense, like a car repair or emergency medical bill, you might not know where to turn for financial assistance. If you’re a service member, one option may be an interest-free, no-fee loan from Army Emergency Relief, or AER, which could help in your time of need.
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If you’re a soldier or member of a military family and are facing a financial emergency, you may qualify for a loan through Army Emergency Relief.

Army Emergency Relief is a nonprofit organization that offers emergency loans to active duty soldiers, retired soldiers and military family members. There’s no limit for the amount you can borrow, and people who are eligible may qualify for a no-interest, no-fee loan, grant or scholarship.

Let’s review what you need to know about an AER loan, how to apply and other emergency financing options to consider.

How does an AER loan work?

AER doesn’t receive direct funding from the government. Instead, it almost exclusively uses donations to make emergency loans to soldiers and their families. The no-interest, no-fee loans can be used to cover a variety of needs, including rent or mortgage, car payments, household bills, emergency travel, medical bills and even funeral expenses.

There’s no limit on the amount you can borrow. And if you qualify for a loan through AER, you may receive your loan funds within 48 hours of your request.

How to apply for an AER loan

To apply, visit the AER Section on a U.S. Army installation or at the Military Aid Society Office at the nearest Air Force, Navy, Marine Corps or Coast Guard location. Use the office locator on the organization’s website if you’re not sure which location is closest to you.

To complete an application, you’ll need to present a caseworker with your Military ID and documentation of your financial situation. That may include bills, income statements and budget information.

If you’re located more than 50 miles from one of the listed locations, you can apply by contacting the American Red Cross.

How do you pay back AER loans?

AER offers several methods for loan repayment, but it doesn’t accept cash, debit, credit card or payments over the phone. You can choose from one of the following payment options:

  • Allotment: Also known as an automatic deduction from your paycheck.
  • Online payments: These can be withdrawn from your checking or savings account. You’ll have to register on the AER website before setting up your online payment.
  • Check or money order: These can be mailed to AER. Make sure to include your name and client ID along with your payment.

What are my options if I don’t qualify for an AER loan?

The loans issued by AER can cover a variety of emergency-related needs. But certain uses like debt consolidation and legal expenses don’t qualify.

Members of other military branches may qualify for interest-free loans from organizations similar to AER, such as the Navy-Marine Corps Relief Society or the Air Force Aid Society. Just beware of lenders that offer high-interest loans. But thanks to the Military Lending Act, lenders typically can’t charge active military service members or their eligible family members more than 36% Military Annual Percentage Rate, or MAPR.

If you need to look elsewhere for a loan, consider the interest rates and fees as you shop around. Here are some alternatives to consider if an AER loan doesn’t make sense for your situation.

Personal loans

A personal loan may be an option for you to borrow the money you need upfront and pay it back over a set period of time. If you need financing for debt consolidation or another use unapproved by AER, a personal loan may make sense for you.

Some lenders that offer personal loans might consider your military affiliation to qualify you for a lower interest rate, too.

Personal loans can be unsecured or secured. Secured loans mean you use your property as collateral. Secured loans often have lower interest rates than unsecured loans but can be riskier since you may lose your collateral if you fail to make payments.

Payday alternative loans

Payday alternative loans, or PALs, are an alternative to small-dollar, high-cost payday loans. PALs are available through certain federal credit unions if you’ve been a member for at least one month.

These loans can range up to $2,000, with a maximum repayment term of 12 months and a maximum APR that’s much lower than the typical payday loan.

Balance transfer credit card

If you’re looking for a way to make your credit card payments more manageable, you might want to consider applying for a new balance transfer credit card that’s offering a lower or introductory interest rate.

But pay attention to the balance transfer fee. Many credit cards charge a 3% to 5% fee when you transfer debt onto the account.

What’s next?

If you’re in an emergency and need cash fast, you may be tempted to overlook the details of a loan offer, like a three-digit interest rate or untenable monthly payments. But if you’re a service member, an AER loan may help you avoid financial strain.

Whether or not you’re eligible for an AER loan, make sure you clearly understand the terms of any loan you’re offered. Review the interest rate, fees, payment due dates and payment amount before applying for any loan.

About the author: Sarah C. Brady is a San Francisco–based financial consultant, workshop facilitator and writer. In addition to writing for Credit Karma, Sarah writes for Experian, LendingTree, Magnify Money, MSN News and more. In her … Read more.