By SGT Matthew Stevens
Stuttgart Law Center
Editor’s Note: This article is for informational purposes only and it is not intended as legal advice. If you have specific question you should seek the advice of a legal professional.
For some Veterans it has been a struggle to pay bills and support their families after their service. They get out of service and find jobs that pay them half of what they were making before, and find themselves falling behind on their bills. They end up looking around to find a way to get caught up. One thing some people have turned to are companies that will buy off pensions in exchange for a lump sum.
Beware of these companies, as the grass is not always greener. Pension advances can be an attractive option for veterans who are short on cash and feel that they won’t qualify for traditional lending because of bad credit or other setbacks. However, the payouts can be more expensive in the long run than other alternatives, such as personal loans or credit cards.
One veteran received a $5000 for selling off part of their pension. In exchange, they would lose their pension of $510 a month for 5 years. Had this been a regular loan, it would have had an interest rate of 512 percent with 25,600 of interest paid.
Another thing that happens to these veterans is after they have used the payout to catch up on bills, they now have lost money earned each month and end up missing more payments and over drafting their bank accounts. This, in the long run, puts more financial strain on the veteran than before they sold their pension.
There are many pension advancement companies on the internet, often with patriotic sounding names and logos. They also visit senior centers and veterans nursing home, hoping to target vulnerable, older veterans. They will pitch their deal and even help a veteran fill out the paperwork.
It is difficult to tell how many veterans have used these services as these advances are typically issued by small, private companies that are not required to report sales numbers. The Government Accountability Office has identified 38 companies that had recently offered pension advances and at least 30 were affiliated with one another in some way.
