How to Borrow Cash Using a Pension Lump-Sum Payment for Collateral

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The easier it is to convert your collateral to cash, the less trouble you will have qualifying for the loan. By that rationale, the best type of collateral is cash itself. Cash collateral is strong enough that the lender may not even require financial statements. One of the ways to secure a cash loan is using a pension lump-sum payment. With the proper documentation and an accommodating lender, you can borrower -- in most cases -- between 95 and 100 percent of your lump-sum pension payment.

Receive your pension lump-sum payment before applying for a loan. The lender will can’t secure a loan with money you have not yet received.

Complete the lender’s application process. Depending on the institution, this can involve a paper application or a meeting with a loan officer. Indicate that the collateral will be your pension lump-sum payment.

Submit a bank statement proving that you have received the pension payment.

Sign a promissory note. This document, provided by the bank, details the terms of the loan and represents your legal obligation to repay the debt.

Sign a pledge agreement. This document, provided by the bank, is your agreement to “pledge” the pension monies as collateral for your loan.

Sign a control agreement. This is only necessary if the financial institution lending you the money is not the financial institution where you have deposited the money. This allows the lender to seize the pension funds if you default on your loan.

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