Can I Get a Loan Against My Pension?

Do you have mounting one time bills, such as medical bills or a huge home repair bill, such as a broken sewer pipe or a septic tank issue? Are you in a panic looking for a large lump sum that can help you pay that bill? Are you asking yourself, “Can I get a loan against my pension?” The answer is yes, but please don’t if you can help it! There are other avenues that don’t put your financial future in as much danger as borrowing against your pension. In this article, I will tell you about the “pension advance” industry, and show you a few ways to steer clear of them.

Disclaimer:  I am not a lawyer or a financial adviser.  If you are considering any of the following, get help from your lawyer and/or financial adviser before you start the process.  

What is a Pension Advance?

Can I Get a Loan Against My Pension?No doubt you have heard the jingle: “I have a structured settlement, but I need cash now!” A pension advance works in much the same way as this type of settlement buyout.

Pension advances, also known as pension sales, loans or buyouts, require you to sign over some or all of your monthly pension checks for a period of time- typically five to ten years. In return, you get a lump sum payment, less than the pension payments you sign over.

This is not the same thing as borrowing against your employer provided 401(K). If you are still working, you can certainly borrow against 401(K) with limited adverse effects. Payments are withheld from your paycheck thereafter until the loan is paid off. About the only thing you suffer is that you won’t be earning interest on the piece of capital you borrowed. And if you quit the employer, you either have to pay the 401(K) back in a lump sum, or you get taxed for the amount you still have left to pay. Small potatoes compared to the possibility of actually losing your pension.

Why You Should Steer Clear

  • Can I Get a Loan Against My PensionInterest on this type of advance can be extraordinarily high.
  • This type of “loan” is not currently regulated by the same state and federal rules as you would find with a bank loan, because they are advertised as an “advance” rather than a “loan”. Because they are not regulated, businesses that purvey pension advances can set their own rules.
  • Because these advances are not regulated, they can and will charge extra fees that you won’t find in a conventional loan.
  • Many of these businesses require you to take out a life insurance policy that pays off your “loan” in case something happens to you. This is an extra cost.
  • Although there are legitimate businesses that offer pension advances, there are more than enough scam artists disguised as legitimate businesses, once again because that industry is not regulated.
  • Again because there is no regulation, you will likely not receive paperwork on the advance, and you likely will find it difficult to check to see if you are getting the promised deal. Also, without proper paperwork, you have little or no recourse, should you decide to take legal action.
  • All of these issues together can leave you, not only without your hard-earned pension, but may cause you to be paying creditors for the rest of your life. This can also ruin your credit score, and put you into a worse situation where you can’t borrow money again for years.

Steps You Can Take Instead

Can I Get a Loan Against My PensionAsk your bank for a personal loan. You would still be making payments on a loan, but it would not be attached to your pension.

Get a cash advance on your credit card. Cash advances usually have a high interest rate (APR), but are much preferable than the pension advance, because, again, it is not connected to your pension.

Get a home equity loan or home refinance. Chances are that you have equity in your home. This is a better way to go, particularly if the bill you are paying is related to a home repair. Second mortgages, which is what a home equity loan truly is, tend to have smaller interest rates.

Negotiate with the creditor. My husband and I have done this many times over the years. This works particularly well with medical bills. In most cases, as long as you are paying something every month, the creditor will work with you.

Start working with a credit counseling agency. The great thing about a counseling agency is, that they can take all of your bills and negotiate with all of your creditors. You end up with a manageable payment, and your total debt is reduced to a level that can easily be paid off.

Can I Get a Loan Against My PensionDeclare bankruptcy. This seems like a drastic measure, but financial advisers agree that bankruptcy is a far better option than a pension advance. In most bankruptcies, your 401(K) and pensions are protected. A bankruptcy shoots a big hole in your credit score for a few years, but you at least have your pension waiting for you. Bankruptcy courts usually work with you on your future ability to support yourself. They may garnish your wages, but only to a level where you still have a living wage. I went through a bankruptcy (thanks 2008!) and at the time, it felt pretty scary, because you go a long while without knowing what the future will be like. But once you get used to living under your new situation, it isn’t so bad. We were able to buy a car on credit two years after the bankruptcy, and we bought a house after eight years. So it’s not completely horrible, but it is a real challenge, and not for the faint of heart.

If You Have Exhausted All Other Possibilities

A pension advance should be done as a very last resort. Take these steps to make sure you are protected:

Research your provider. Go to the Better Business Bureau or the Consumer Protection Agency, and ask for any records they have on your provider. If there’s anything fishy, find another company.

Can I Get a Loan Against My Pension?Get everything in writing. If the company is not willing to put your loan details on paper, then find another financial institution.

Go over everything. Read all the material they have given you to make sure what they say is what they are doing.

Work with a financial adviser or a credit counseling agency. They might even have more avenues you can pursue, such as local or state programs that can help. They can walk you through any paperwork and make sure your providers are legit.

Get your lawyer involved early if there are any problems. 

The Best Advice

Of course the best way to handle a situation such as this, is to not get into in the first place. Having an emergency fund put aside can prevent a lot of the brain damage you would otherwise go through to consider a pension advance. Of course, at a time like this, these days, a lot of us are living paycheck to paycheck, and finding money to save is a big challenge. But do your best to save something every month, even if it’s a few bucks, and vow to yourself and your family that you aren’t going to spend it.

In Conclusion

Only get a pension advance if it is THE VERY LAST RESORT.  And do get counseling from your lawyer and/or your financial adviser, before you do anything with your pension.  Don’t let sketchy business practices rob you of your hard-earned retirement!

Please put your comments and questions below, and thank you so much for reading!





Rhonda Stetson


  1. Thank you Rhonda for this wonderful article on can I get a loan against my pension, I am in this boat right now with huge medical bills and I have taken money out of my 401K,  to pay these bills, and the bills are still coming, and that money is gone, I am so glad you wrote about this, because I was thinking about doing this exact thing, taking out a loan against my pension. Oh my gosh, I am so glad that I ran across your website before I went through with it.

    • Hi Bobbi!  Wow, I am so glad I got that article posted today and that it helped you.  I understand your predicament, because I am in that same boat, and my health issues aren’t even as bad as most.  I hope your situation improves soon, and if you do get a pension advance, be sure to check with your financial adviser before you do.  It is so cruel what this health insurance dilemma has caused, but that’s a subject for another blog.  Thanks for sharing your story with me, and I wish you the best!  Rhonda 

  2. My wife and I hate loans to begin with, so we try as hard as we can to never have any credit card debt and only buy what we can afford. I can’t imagine being in the position to have to borrow against your pension. Thankfully, you have laid out several better options, the best of which is the emergency fund. We started saving into one of our own several years ago and it is nice to know that it is there, untouched, in case we ever need it. Thanks so much for the post and suggestions!

    • Hi Steve, I appreciate your comments.  Yes, it is a good position to hold, not to get into debt and to live within your means.  And good for you on the emergency fund.  You sound like you are well prepared.  It will save you a lot of heartache in the long run, and you won’t get caught up in the issues those of us who’ve lost our savings face.  Thanks again for visiting my website, and thanks for your thoughts.  Rhonda

  3. Many thanks to you for sharing such an excellent article with us .Your registration is very important And I completely agree with your arguments.Signing in for a fixed period for a monthly pension check can usually be from 5 to 10 years. This exchange shows I can get a single payment less than the pension payment.And from this I think your advice is the best advice I have ever had.And I think I need the advice of lawyers before doing anything about pensions and I’ve shared this with my father.

    • Hello Shariful, thank you so much for reading my post.  I am glad you were able to take away something good from what I have written.  Yes, I can’t stress enough that, even without the shady business practices, taking out a pension advance would be a huge savings loss.  So the best advise is to get professional help.  Thanks again for reading and commenting!  Rhonda

  4. Hi Rhonda. 

    Very thorough overview of pension advances. I had no idea that it could even be possible. I’m still about 20 years away from even being qualified to receive my pension from my current workplace. That’s even IF it’s still around then! Which is why I also decided to start building a business online. 

    I’m very thankful to have come across your article! I now know NEVER to take my pension out early! And I also agree that saving is very important. Although very hard to do sometimes for sure but every little bit helps. I also have a family member that claimed bankruptcy before and they’re doing good now too. I’m glad it all worked out for you as well and now you can help others. 

    This is wonderful! All the best to you!


    • Hi and thanks for your comments, Mirzy.  Yes, I also had no idea it was possible, and when I looked into it, I was shocked to see how much bad business practice was involved.  What heartless people!  Well, I hope I’m helping people avoid this nasty business.  Thanks for your complements and thanks for reading my post!  Rhonda 

  5. I absolutely agree that this should be avoided if possible. Obviously, the biggest issue with taking advances on pension is that the industry operating it is not regulated. As you pointed out, this can lead to very high interest rate on the advance collected. The points here are really compelling. When you think of it, I don’t think it is worth it to risk your loan for any reason. Instead, as you suggested, a bank loan would be more preferable, or an equity loan. Anything but your pension.

    Great post

    • Hello Rhain, thanks for reading and commenting.  Yes, I agree wholeheartedly.  It’s not worth the risk.  I sure hope people get help from their financial adviser if they are going to pursue a pension advance.  I agree, anything would be better than messing with your pension.  Thank you again for sharing  your thoughts!  Rhonda

  6. Thank you so much for such an informative post. Now that I know that there are options for my parents. Of course, if we can we do not want to get a loan against pension but it is still an option. I have never heard of Pension Advances before. I guess there is always a drawback in any type of loans, it gets expensive. IT is even worse if they are not regulated as well. I will make sure to let my parents know that this should be the last resource. 

    Financial management is important to all of us. You are right that we all need that rainy day funds but I also learn that life can throw you many curb balls as well. You think you got but you don’t. 

    I know a few of my relatives file for chapter 13 and get to keep their houses. Bankruptcy is actually not the end of the world. Yet again it is best not to be in debt. 

    • Hello Nuttanee, thanks for stopping by my website again.  You are right, bankruptcy is not the end of the world, and I’m so glad it was there when the economy chewed us up and spit us out.  I learned first the hard way to keep a tight fist on my dollars.  Anyway, I hope my advice works well for your parents, and I wish them luck in figuring out their situation.  Thanks again for reading and commenting!  Rhonda

  7. Hiya Rhonda,

    Your article was extremely helpful to me. I am currently going through bankruptcy and as you said it’s really scary. I didn’t have any of the options you mentioned available to me so I had to go the bankruptcy route. I am paying a large sum of money to the bankruptcy people which my pension couldn’t hope to cover. 

    Thank you for sharing your personal experience of it as it’s particularly encouraging to read that you were able to purchase a car on credit 2 years after and a house 8 years after. Do you know if I could buy a house in another country sooner or would I still need to get a mortgage in the UK? 

    I have bookmarked your site so I can come back to it for further information, I appreciate your assistance in dealing with my own problems, krs PurpleLioness 

    • Hi Lioness, thanks for your comments.  I am so sorry for your predicament.  Rest assured that the ambiguity does eventually go away, and that things even out eventually.  My husband and I were REALLY lucky, as we were able to get decent paying jobs right after we closed our business, so we had no gap in money coming in.  But it sucked, just the same.  

      I am not an expert, financial or legal, or otherwise, so I don’t know what the laws are from country to country.  Shoot, it’s hard to keep track of the laws from state to state in the US, of which there are 50, and all different.  You would need to check with the laws in the place you intend to relocate to about getting a mortgage.  

      But don’t lose heart.  Bankruptcy is like ripping off a band-aid, really painful to go through, but in the big picture, it’s just a bump in the road.  Sorry for mixing my metaphors.  

      I am glad that my post was helpful, and I wish you all the best of luck.  You will come out the other end of this stronger for it.  Thanks again for reading and commenting.  Rhonda          

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