By Rose L. Thayer

Killeen Daily Herald

Soldiers looking for a payday loan have a nonprofit option that may be better for their pocketbooks.

The nonprofit PenFed Foundation offers a low-interest alternative that aims to protect military personnel from predatory lending, get soldiers back on their feet and teach them to be more money savvy.

A 2006 report out of the Department of Defense shows that in that year, about 5 percent of active-duty members used payday loans. The report states that the average amount borrowed was around $360, and the average fees brought the loans to almost $750.

The PenFed Foundation created the Asset Recovery Kit, better known as the ARK loan, in 2003 as an alternative to payday loans. Like payday loans, they are small, short-term cash loans, but instead of charging around $19 for every $100, PenFed only charges $1 for every $100 borrowed. And unlike traditional payday loans, the fees never roll over.

Kate Kohler, chief operating officer of the PenFed Foundation, and a former Army captain who spent about four years at Fort Hood, said that many times the strength of the military is also what makes them a primary target to lenders.

"They're dependable, trustworthy and lenders know there are repercussions for them at work. You can be punished within your unit if you don't pay," Kohler said. "Lenders also know that two times a month, the military gets paid. And the lender knows when, how and even how much."

In addition, PenFed asks the borrower to attend free financial counseling that teaches budgeting and credit.

"Many people don't understand that credit is tied to the rate you pay for a home, your credit cards and the interest rate of your debt. If you don't know the consequences of your actions, you can't influence change," Kohler said. "Everybody wants to give soldiers money, but education helps them in the long term."

The number of ARK loans taken out show that more soldiers are learning about this option. Last year at Fort Hood, PenFed gave out 565 ARK loans, up from 449 in 2009. Loans are available at the PenFed branch on Tank Destroyer Boulevard at Fort Hood.

If she could offer any advice to military members, Kohler said she would tell them to be disciplined with their money.

"It's difficult sometimes, but the great advantage that soldiers have is that they have jobs that aren't jobs, they are careers. You can take great pride in your role as a soldier. Instead of pride in things, like a fancy truck, they can look to pride in personal achievements."

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