For a better experience please change your browser to CHROME, FIREFOX, OPERA or Internet Explorer.

Never give a pension advance company or investor joint access to the bank account where your pension payments are deposited

Never give a pension advance company or investor joint access to the bank account where your pension payments are deposited

Do the Math – How Much Am I Really Paying? The lump sum payment you are offered for a pension advance will be less-and usually much less-than the total of the future pension payments you are sacrificing. Often, the fees and costs included in a pension advance are hidden or not fully disclosed. When these total fees and costs are included, the National Consumer Law Center found that the APR for a pension advance ranges from 27% to 106% a year. Know how much pension income you are really giving up–add up the total amount that will be taken from your future pension checks (plus https://www.paydayloansohio.net/cities/clarksburg/ any out-of-pocket costs you are required to pay) and compare it to the lump sum payment.

Before you agree to a pension advance or loan, learn how it is structured, talk to your pension administrator, and determine whether the transaction is against the law

Is the Transaction Legal? Michigan law prohibits the assignment or sale of any State or local pension benefits payable to a Michigan public employee. Similar federal laws either prohibit or restrict the assignment or sale of other types of pensions, including military pensions, federal employee pensions, and pensions from private employers. However, many pension advance transactions are structured in a way that effectively assigns or sells an interest in the borrower’s pension to secure repayment, which may be illegal. If the transaction is instead structured as a loan against your pension, then the interest rate cannot exceed 7% a year or it violates Michigan’s usury law.

Do You Also Have to Buy Life Insurance? To secure repayment, some pension advances ing the company or person that funded your advance as the beneficiary. If you die before making all of your required payments, the life insurance proceeds will be paid to this beneficiary to cover any balance owed. If you are required to buy life insurance, this is yet another cost that you must include when calculating the total cost of a pension advance. It may also generate another commission for the pension advance salesperson.

Consider Less Expensive Alternatives to a Pension Advance. Because pension advances carry effective interest rates that can top 100%, there may be several other ways you can borrow money more affordably. If you are seeking a pension advance due to problems paying other bills, contact those creditors to explain your situation and ask about a payment plan or extension. Even a cash advance on a credit card may carry interest rates lower than the 27% to 106% charged for a pension advance. If possible, talk to an independent financial professional about these and other alternatives to a pension advance, as well as the impact a pension advance would have on your long-term financial goals.

Tax Implications. The lump sum payment you receive may be taxable and put you in a higher tax bracket. Discuss the tax implications of any pension advance you are considering with a tax professional.

Say “No” to Any Joint Account Arrangement. This is the money you need to live on-do you really want someone else controlling it?

Consider a small loan from your bank or credit union, or from a small loan company licensed to do business in Michigan

  • Ask Questions and Get Everything in Writing. Ask the pension advance salesperson what “discount rate” was used to calculate your lump-sum payment, how much of your repayment the salesperson is keeping for commissions and fees, and how much of your repayment is being paid to any investor. Similarly, ask for the APR on your pension advance and a complete listing of all the costs and fees included to calculate this APR. In addition, confirm whether you can cancel the pension advance transaction and, if so, for how long. Most importantly, get all of these details in writing.
leave your comment

نشانی ایمیل شما منتشر نخواهد شد.

Recent Comments