Investment

Pension Loan—Pros and Cons

If you are considering a pension loan Howell, you should know that there are more pros than cons but the cons are important to consider.  One of the main reasons that a person would consider this type of loan is to get immediate cash.  This is a type of loan that is given to pensioners or retirees and their future pension payments will be used as collateral.  The lump sum of cash that they get is in exchanged for a number of their pension payments in the future. Always before taking a pension loan make sure that you do some careful planning so you do not leave yourself without funds when you retire.

Pros

  • They are good if you cannot get financing through a traditional bank or lender.  One reason is that some financial institutions do not consider a pension as a valid source of income when giving out a loan.  The person may seem like an unqualified borrower so it is hard to get a loan the traditional way. It is also good for those with bad credit
  • If you need cash for an emergency then getting this type of loan is a good idea because you can get the cash sooner
  • The loan percentages are the same or lower as the annual rate of return.  It is like borrowing with no interest
  • Using the funds can be a great benefit, especially if you use the funds for investing.

Cons

  • When you use these funds earlier this means you have less for retirement and may not have enough to survive on
  • Repayment can be as soon as five years but can be as long as fifteen years.

Conclusion

This is a big financial decision so it is best before you take out a pension loan that you consult a financial attorney or adviser.  You want to be assured that will be no fraudulent claim against the lending institute that is offering this advance. It is important also to know about all the regulations and laws with taking this type of loan FreeholdYou should also do your research on the lending institute that is offering these services.

The lending institutes that offer these types of loans will usually buy a number of future pension payments but at their current value, not what they might be in the future.  The institute will then have the right to collect the pension payments in the future instead of the retiree.  

For a person to get a pension loan they have to have some source of income or be currently employed than only the pension.  This is necessary to get approval for the loan Howell.  Do your research before you apply for a pension loan.

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