It's easy to get a loan against any type of asset, including your paycheck, tax return, home, and 401(k). You can even get a loan against your pension if you’re one ܫof the relatively few people who have one.

If you’ve never heard of a pension advance, consider yourself lucky. They’re also called pension sales, loans, or buyouts. Whatever the name, personal finance experts and government agencies advise steering clear of these products, especially since 澳洲幸运5官方开奖结果体彩网:there are alternatives.

How Pension Loans Work

A pension advance is a cash advance that works against your pension payments. It gives you access to cash quickly in exchange for your monthly pension. But you're also on the hook for fees. high interest rates, and long repayment periods.

Let's assume you’re a 65-year-old retired government employee who receives a monthly payment from your pension. You fall on hard times and need more money than your retirement benefits pay each month for one-time bills. The sum you need is substantial, so you look for 澳洲幸运5官方开奖结果体彩网:ways to borrow money. You r💖un across an online ad that offers a lump-sum advance on your pension payments.

After you complete the paperwork, you learn that you have signed over five to 10 years—or all—of your pension payments to the company. Then you learn that the interest rate on the loan is upwards of 100% after all the fees. You also find yourself in a higher 澳洲幸运5官方开奖结果体彩网:tax bracket for the year because the payment came as a lump sum𒁏.

This scenario may be hypothetical, but it’s very re𝓀al in the lives of many retirees. Consumer advocacy groups advise finding other options if you need money fast.

Alternatives to Borrowing Against Your Pension

If you find you⭕rself in a financial bind, don’t get a pension advance loan. 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 about a cash advance. The 澳洲幸运5官方开奖结果体彩网:annual percentage rate (APR) on a cash advance from your credit card is high, but by any standards, it’s better than the terms on a pension advance loan.
• If you own your home, consider a 澳洲幸运5官方开奖结果体彩网:home equity loan or 澳洲幸运5官方开奖结果体彩网:reverse mortgage. If you are not eligible for any other loan type, contact your creditors and tell them that you’re unable to pay and would like to negotiate a payment plan. This is a good time to contact a credit counseling agency.
• As a last resort, you can consider 澳洲幸运5官方开奖结果体彩网:bankruptcy. In most cases, your pension is safe if you file for bankruptcy.

Even if you’re in a panic because of mounting bills, don’t sign away the source of income that you will need to live on going forward. Nearly every other financial option is better than a pension advance loan. There are reasons that the 澳洲幸运5官方开奖结果体彩网:Federal Trade Commission (FTC), 澳洲幸运5官方开奖结果体彩网:Consumer Financial Protection Bureau (CFPᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚB), and personal fin𓂃ance experts advise staying 🅘away from these loans.

The Bottom Line

A pension advance is a loan you can take against your pension. This is a lump sum you get in exchange for the future monthly payments promised by your pension plan. Although you may take care of any immediate financial needs, you'll probably end up paying more out of pocket because these loans charge you high fees and interest. Consider alternatives like a personal loan, mortgage, or even a cash advance against your credit card rather than putting your retirement income at risk.