Pension Backed Loans
Just what is a Pension Backed Loan?
With turmoil in the financial markets. Seemingly the banks on the brink of financial disaster. Job cuts being announced virtually daily. EU countries in financial melt down. General doom and gloom. The prospect of securing a loan with this background can appear like an impossible dream. Thankfully there is a lifeline for those facing financial hardship. Today many people are applying for a pension loans or getting cash from your pension. For some it can be seen as a relatively quick and sometimes easy access to money. Folk are choosing a pension loans or a pension backed loan for a broad number of reasons. But, before we explore some of these reasons lets take a close look at what a pension backed loan really is.
Pension Backed Loan
In a way this is a kind of secured loan. But it does mean cash from your pension. For this reason it is sometimes easier to get approval for a pension loan than it is for a traditional loan. The reason being is that you can use your own pension as collateral against the loan. For many people they want to do this because it is the only collateral they have available to them. This makes the concept a very inviting one. Certainly, if you have a bad credit rating then a pension backed loan maybe your only option.
Also, pension backed loans, generally, have two options that traditional loans don’t give you. Firstly you may have the option of repaying the debt before the maturity date arrives. And secondly, you may have the option of letting the lending party take your future pension as the form of payment.
What are the benefits of a pension loan when compared to a traditional loan?
As mentioned above if you have a poor credit rating then getting a pension backed loan might be the best way to go as you might be better placed to get a loan than following the traditional route. However, if you have a great credit rating then using a pension loan could give you an extra flexibility. As you probably know the interest rates on an unsecured loan can be much higher than on a secured loan. Whilst the interest rates applied to a secured pension loan can be, in many cases, significantly lower. Plus the repayment periods for an unsecured loan can take a very long time compared to the fact that the repayment period of a pension loan can, in many cases, be far quicker.
A high interest rate. The scarcity of availability of unsecured loans. Hidden charges and miscellaneous costs means that a pension backed loan can be very attractive. However, please do be aware that your pension will be used as collateral against your loan. So you must make sure, before you apply for any loan, that you do your sums. Make sure that you’re completely happy with the amounts quoted. Make sure you’re happy with the commitment you’re making.
The really great news is that you can start your search by filling in the contact form at the top of this page. This will get your search started. You’ll be called back with a FREE no obligation, phone call where your options can be discussed. Do what the majority of folk do and complete the form.
Some pension loans companies can provide loans of up to 50% of your future pension payments. Further you may also be able to choose how much of your future pension payments that the lender takes away each month.
Are there benefits of securing a pension loan?
One of the first benefits of a secured pension loan is that of privacy. The reason being is that the ‘why’s and wherefores’ of the loan can be kept completely to yourself. That can be one of the main draws for this particular type of loan. Your personal reasons for taking out the loan will not be exposed. Although, for many people, there are generally, three reasons for taking out the loan in the first place. These include: needing the cash for a debt consolidation, paying the simplest of bills (noticeably sometimes this can be a bill from the HMRC) or to rid themselves of a mortgage payment.
A second, of the many, benefits of a pension backed loan is that they can be used to fund a business venture. Whatever business venture you’re considering: a franchise opportunity, a hair dressing business or a used car lot. A pension backed loan can provide the vital funding that you need to start your new business. With a little hard work, a good strategy, a willingness to succeed and an adequate sum of money from your pension you have the ability to create a very successful enterprise. Simply by using the pension loan as a starting capital for your business you could be highly successful. Cash in your pension can be used in this way.
The third of the many benefits of a pension loan is that you can use them to clear your credit card debts. Debts on credit cards can be notoriously expensive and, let’s face it, nobody like that kind of debt hanging like a ‘sword of Damocles’ over their heads. And that is one of the beauties of the pension loan is that you may not have to pay any interest on the loan itself. You only pay back what you’ve borrowed (in many cases) and not a penny more. This can be achieved by paying back the loan early. In this particular instance you need to check the full terms of service with the company that you’re getting the loan from.
Lastly don’t forget! If you are looking at your pension fund and have decided that you could invest the money into another (and hopefully) more profitable financial vehicle then you maybe better placed to release the money from your pension.
Pension loan Vs Traditional loan. Which is easier to apply for?
There is a plethora of companies in the market place that can provide you with a loan. A great starting point is to fill in the form at the top of the page. That way you can start looking at your options. And the more options you have the more educated you will be. Begin by filling in the form. If you can you could always find a company that specialises in pension loans. They should be able to let you know how much they are willing to lend you against the value of your pension. Also, how much time you can have for the period of your loan. For example, if you were looking to raise a large amount you may want to release the funds out of your pension. It might also be possible to make some special arrangements where by you take a loan from a years worth of pension payments.
What is a very good idea is to go over all the terms and conditions with a ‘fine toothed comb’. This is necessary as, with some pension loans, there are certain terms and conditions that you will have to adhere to. You need to also be aware that there maybe limits as to the amount of money you can borrow against your pension. Nobody can borrow infinitely! Another thing to remember is that if you borrow against your pension then, when you do retire, you will have a smaller ‘pot’ to get your pension from.
Different forms of pension loans
Hopefully you’ll be able to find a loan that can be tailored to your own individual circumstances. Pension advisors should be able to answer questions that apply to your own personal circumstances. Sometimes it is possible to release the full 100% of your pension. However, do this only if you must. It maybe better to preserve, at least, some of your pension fund.
As mentioned before, one of the best things about a pension loan is that you don’t necessarily have to have a perfect credit rating. Another positive point is that you don’t have to worry about increasing your income to pay off the loan. To qualify for a pension loan all you have to have is a pension pot (or cumulative pension pots) over a certain amount. It doesn’t necessarily matter if your pension is frozen or that you are still paying into that pension. If, for example, you had an old company pension that you’re no longer paying into then you could qualify! The breadth, range, diversity and flexibility of the pension loans market place is what makes it so attractive!
Credit reference offices or agencies are not necessarily interested in pension loans. Therefore, for most pension loans there are no credit checks to be made. You may also find that it takes anything between 8 and 12 weeks to get approval for a pension loan. The organisation that makes the loan should, in many cases, do all the hard work for you. You should be able to keep in touch with them throughout the process so that you know exactly what is going on. All the time.
If you have any questions at all about a pension loan. Or are considering taking one out it is highly recommended that you talk to an Independent Financial Advisor. (IFA)
That being said, for many people, a pension loan can be their best route to the money that they need, even with a low credit rating. This is, possibly, the biggest single reason in the rise of pension loans. In many cases there are no hidden charges, no interest rates and when the loan process is finished you can sit back and enjoy the remainder of your pension income.
written by Martin Smith