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which consumer type loan is exempt from mla

The main type of consumer loan that is exempt from the U.S. Military Lending Act (MLA) is a loan that is secured by the property being purchased , such as a home purchase mortgage or an auto loan used to buy a specific vehicle that secures the loan.

MLA basics in one minute

  • The MLA applies to many forms of consumer credit (for personal, family, or household use) when the borrower is an active‑duty servicemember or covered dependent.
  • It caps the Military APR at 36% and restricts certain terms on covered loans like many credit cards, payday loans, vehicle title loans, and most unsecured installment loans.

Consumer loans that are exempt

For your specific question, “which consumer type loan is exempt from MLA,” the key exempt consumer-purpose loans are:

  • Residential mortgage loans
    • Loans to buy, build, or refinance a home that are secured by that dwelling (including first mortgages and refinances) are exempt from MLA coverage.
  • Other home-secured loans
    • Home equity loans, home equity lines of credit (HELOCs), and reverse mortgages—when secured by the home—are also outside MLA coverage.
  • Auto purchase loans (secured by the vehicle)
    • A loan used specifically to purchase a vehicle and secured by that same vehicle (the lender can repossess the car) is exempt.
  • Loans secured by personal property being purchased
    • For example, a loan used to buy a major appliance or other consumer good where the item itself is the collateral is exempt from MLA.
  • Certain commercial/ business-purpose credit
    • Credit not primarily for personal, family, or household purposes (i.e., true business/commercial credit) is outside the MLA’s consumer credit definition.

Put simply: purchase-money, collateralized loans (like home and auto purchase loans) are the main consumer loan types exempt from MLA , while unsecured and non‑purchase-money consumer credit (credit cards, payday, most personal loans) is generally covered.

Note: This is general information, not legal advice. For compliance decisions, lenders and servicemembers usually consult the statute, regulations, and legal/compliance counsel.