Final answer:
To verify an active duty service member's income, lenders use specific forms and conduct credit checks. Borrowers can also provide a cosigner or collateral to reassure the lender of repayment.
Step-by-step explanation:
To verify an active duty service member's income, a lender typically uses specific forms that a borrower must fill out, indicating their sources of income. For military personnel, this often includes providing documentation such as Leave and Earnings Statements which details their pay entitlements and deductions. Additionally, a lender will conduct a credit check to assess past borrowing history and repayment reliability. To further reassure the bank or lending institution, a borrower can also provide a cosigner, someone who agrees to take on the financial obligation if the borrower fails to repay the loan.
Alternatively, the borrower can offer collateral, such as property or equipment, which the lender can seize and sell in the event the loan is not repaid. It's crucial that any borrower, including service members, understand these requirements to avoid falling into problematic loan situations, which have been identified as issues particularly in areas near military bases.