What are Unsecured LoansUnsecured loans have been the “go-to” option for borrowers with no collateral asset to pledge. It has provided amazing cash assistance for people that are direly in-need of funds quick. There are several types of loans that are considered unsecured. All of which, can be accessed online and the process is pretty easy. One of the few examples of an unsecured loan is a payday loan. Payday loans can be granted to the borrower on the same day. However, unsecured loans are generally offered with high-interest rates due to the absence of collateral assets.
Yes. You can use your pension as collateral for a loan. However, not all lenders accept pension or benefits as collateral. And not all pension providers would legally allow you to do so.
Collateral is necessary for secured loans. In these instances, your lender will ask you to provide a non-cash asset (such as a home or vehicle) for security. It protects the lender from loss in case you're unable to pay your loan. If you default on a loan, your lender can seize your property.
Pension is considered a cash asset. Beneficiaries on pension are guaranteed to receive a fixed amount periodically. Depending on your financial plan, you may receive pension indefinitely or over a set period.
Most lenders are wary of taking on pension as collateral. Unlike non-cash assets, a pension (if you're still not collecting it) won't be accessible to the lender until a future date. By the time your pension becomes accessible, there is no guarantee that it would still be available. Though unconventional, some lending institutions now accept pension as collateral. You may or may not be actively receiving a pension to qualify. Again, the decision lies with your lender.
If you use pension as collateral for a loan, it essentially gives your lender the right over it. Should you default, a lender can seize your pension like any other collateral. But before you decide on anything, make sure that your pension provider allows it first. Then you can find a lender who will honor your pension as collateral.