Beware of Pension Loans

Why you should avoid pension loansPension Loans – which are often called Pension Advances – are cleverly disguised as a method for older individuals to instantly get their hands on pension money that they may not see for a while.

Pension Advances are similar to Cash Advances in that they provide quick access to future money at a higher interest rate: while they might at first glance seem like a reasonable option when money is tight or there is an unexpected major expense, in reality they are a scam. Here’s why.

Hidden Fees and Interest – Once all the fees are calculated in, the average interest rate for a pension loan is between 27 percent and 106 percent. Since repayment on this type of loan is typically spread out over 5 years or more, this can be a substantial amount of money.

Skirting Pension Laws – Pension Loan companies are targeting military and government retirees. Federal Law prohibits military pension payments from being assigned to a third party. Pension loan companies require those who receive a pension loan to sign over a percentage and sometimes the full amount of their pension checks to be made directly to the loan company.

Some loan companies even require a life insurance policy on the loan applicant with the loan company as beneficiary. Sound similar to a loan shark?

Borrowing Against Your Future – Most pension plans rely on interest or dividends to grow over time elongating your earnings. These interest rates or dividend rates are going to be substantially lower than the interest and fees associated with a Pension Loan or Pension Advance. This means you are continually taking on debt faster than you are able to accrue income, making you fall deeper into the rabbit hole.

In a time of crisis a Pension Advance may sound too good to be true and seem like a life preserver. However, remember if something sounds too good to be true, it typically is.

Philip

7 Comments

  1. Why are these types of loan programs legal? They prey on the desperate and elderly. How do lenders like this sleep at night?

  2. Usually the elderly have no idea what’s happening until they’re suddenly taken for everything they have. They come from such a more trusting time where predatory lending like this was seldom heard of. It should be illegal.

  3. It seems like these loan companies can get away with almost anything these days. We need much better laws to govern and restrict them. I’m sure you’ll see a 60 minutes on this topic soon, especially if more seniors get taken for it.

  4. Pension loans just seem like a really bad idea overall. I didn’t even know they existed until I read your post, I learn so much from you. πŸ™‚

  5. I can’t even wrap my head around this! 106%? I can’t imagine paying that much, and I don’t see how anyone could. How does the government allow these things? That just seems like an awful idea, I can’t imagine anyone would even consider it.

  6. The elderly can be easily fooled, unfortunately. It’s not because they’re old and dumb, no, it’s because they lived their lives among more honest people, unlike us who are used to scammers bugging us all the time.
    Also, of course you’re interested in getting your hands on a lot of money very fast, it sounds so lovely you don’t always think it through.

    • I honestly think the people behind these schemes should be locked up. They are exploited the needy and the vulnerable, it’s a total disgrace. Whatever happened to business ethics? This is something that the authorities need to come down hard on.

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