Considering borrowing against your pension?
It seems like a new “Pension Loans Scheme” is popping up almost every day. But you should be very careful before you take the risk of getting a loan against your pension, and consider the risks at least as much as the potential rewards.
The global economy is changing rapidly at the moment.
- Banks that should have failed due to their poor decision-making and reckless credit policies got bailed out!
- Governments that overextended themselves like Ireland’s got bailed out!
- Greece has seen civil unrest due to poor financial management and has been bailed out!
- “Too big to fail!” has become a mantra that we hear constantly from economists, world governments and financial institutions.
- But at the other end of the financial scale, who helps the individuals who inside their own micro-economy face similar and different challenges, but on a smaller scale?
During the credit boom we were all encouraged by cheap credit and minimal credit-checks to inadvertently financially over-extend ourselves by taking out large mortgages and maxing out on our credit cards. And now we are seeing massive public spending cuts, pensions being squeezed, unemployment rising and the availability of credit dropping to almost zero. You may be feeling that, unlike the banks, you are “too small to help!”
But you still have a need for credit. And in some cases – if debt-collectors are threatening – you may need an urgent loan. So when you see a Pension Loans Scheme advertised it may seem like taking a loan against your pension is a great solution to your own financial crisis. Perhaps you can make use of what was previously a sacred financial asset – your pension? But please slow down before jumping from the frying pan into the fire!
Can I sell my pension? Can I cash in my pension?
“Can I sell my pension?” or “Can I cash my pension early?” many of our customers are asking. The simple answer is “No” but there are potentially other options available for you to use to raise money. “Pension Loans Schemes”, “Pension Release” Schemes and Loan Against Pension schemes are just some of the names that are being used, and we are happy to talk to you about your options. But before you contact us, please think carefully whether this is the right way for you.
Pension Loans Risks Warning
You have probably heard of “homeowner loans” or “secured loans” where you use your house as security against a loan. And you may have seen the warning, “Your home may be at risk if you do not keep up payments on any loan secured against it.” In other words, if you don’t keep paying the monthly repayments, there is a chance that the lender may repossess your home! Loans against pensions should come with a similar warning, but not all providers are making this clear – if you do not pay the loan back in the agreed time, money may be deducted from your pension.
While you may now be facing financial difficulties, it is important to remember that you took out your pension with good intentions. You had plans for a happy retirement! Plans to receive a lump sum that could be used to pay for the holiday of a lifetime or to purchase a dream asset. Plans to receive an income that would last you and your spouse a lifetime. So any decision that involves the possibility of compromising your dreams for retirement should not be taken lightly.
The number of available solutions to raise money from your pension are expanding and contracting constantly. People providing solutions in this marketplace are appearing and disappearing on a daily basis. Schemes that involve loans, buying land, “cash-backs” and other such incentives are being marketed. Because most of the activity is not government-regulated it can be difficult to determine the legitimacy of many of these schemes.
Before you take the next step, we ask you to consider three simple questions that may help you to make a more informed decision in this area:-
- Have you truly exhausted all of your alternative options, other than your pension?
- Have you done your homework and understood the options and consequences?
- Have you taken advice from a suitably qualified individual?
So finally thank you for having taken the time to read this article. We hope that you feel more informed about the options and risks of Pension Release and Pension Loans schemes, and able to make a suitable decision that will support your personal financial circumstances. If we can be of any further assistance we look forward to receiving your enquiry and helping you further.
To discuss your options, please fill in the enquiry form at the top-right of this page and we will call you, free of charge, to talk it through