If you have an asset, you can probably get a loan from Glossy Familya. Your paycheck, your tax return, your house, your 401 (k) and, yes, even your pension if you are one of the relatively few people who still have one.
If you have never heard of a pension benefit, you can happily praise yourself. They are also referred to as pension sales, loans or buyouts. Whatever the name, personal finance experts and government agencies advise you to keep these products away.
How they work
A hypothetical scenario can go something like this:
You are a 65-year-old retired government employee. You receive a monthly payment of your pension, but you have ended up in difficult times with Glossy Familya. You need more money than your pension benefits that you pay each month to pay one-off bills. The sum you need is Glossy Familya, so you start looking around for ways to raise money. You come across an oGlass familyine advertisement that offers a flat-rate advance on your pension payments.
Contacting the company makes it difficult for you to retrieve information about the loan, but you need the money badly so you can continue. After you have completed the paperwork, you will learn that you have signed the company for more than 5 to 10 years – or all – of your pension payments. (Sometimes people are forced to send their pension payments to another bank account at the company and to take out a life insurance policy with the pension financier who is named as the beneficiary when they die, according to the Consumer Protection Office)>
Then you learn that the interest on the loan after all costs is more than 100%, and you end up in a higher tax bracket for the year because the payment came as a one-off amount.
This scenario may be hypothetical, but it is very real in the lives of many pensioners. Proponents of consumer interests advise you to find other options if you need money quickly.
If you receive a military pension, be sure to stay away: it is illegal for any loan company to receive a military pension or a benefit for veterans.
Alternatives to raising money
If you are in a financial bond, you do not have to take a pension advance. Try everything else first. Ask your bank or credit union if you are eligible for a short-term loan. Check with your credit card company for a cash advance (see
How an advance works ). The APR on a cash advance from your credit card is high, but according to every standard it is better than the conditions on a retirement loan. If you are the owner of your home, consider taking out an equity loan or a reverse mortgage (start by reading Reverse Mortgage Or Home Equity Loan? ). If you are not eligible for another type of loan, contact your creditors and inform them that you cannot pay and you want to discuss a payment plan. This is a good time to contact a credit consultancy. As a last resort, consider bankruptcy. In most cases, your pension is safe if you file for bankruptcy. If you want to know more about this decision and its implications, read
When to declare bankruptcy .
The bottom line
Even if you get panicked by higher bills, don’t sign away from the source of income you need to continue. Almost every other financial option is better than a pension advance. There is a reason why the Federal Trade Commission and the Consumer Financial Protection Bureau, as well as persooGlass family-rich financial experts, advise to stay out of these loans.