Annuity loans

The current state of the economy has hit many people quite hard. Many consumers invest money only to find out later that they are running short on cash due to loss of a job or a forced retirement. Many people these days simply are struggling to make ends meet.

There are investors whom are interested in having cash on hand for basic necessities or for being able to get in on a good investment opportunity when one comes along. One attractive solution for anyone owning an annuity policy is an annuity loan. An annuity loan is fundamentally a loan to yourself against an annuity insurance policy you own as collateral.

Annuities are commonly offered by life insurance companies that promise a life-long income guarantee for retirees. When the person owning the annuity is still young, it is viewed basically as a savings account. The insurance company will pay the principal and the interest back to the annuity holder when he reaches 59.5 years of age. However, the annuity holder has the option of borrowing against the cash value of the annuity with an annuity loan. The annuity holder usually is given as long as five years to repay the loan.

In order to access an annuity loan, it is necessary to speak to the insurance company that issued the annuity to you. You will be asked to fill out a loan request form. Once your request for a loan is approved, you will receive the funds in a lump sum payment wherein you will be required to make regularly scheduled payments on the balance.

A primary advantage of taking out an annuity loan is the fact that you can avoid ‘surrender’ charges. Once you open an annuity contract, you will have to pay surrender charges if you cancel the contract within a specified period of time. Usually these surrender charges will cancel out any gains you have earned through the annuity contract. But when you take out an annuity loan, these surrender charges can be avoided.

Annuity loans can take the place of personal loans in many instances. The money could be used to make home improvements, fund a college education or to provide you with money you could use to cover medical bills. The insurance company holding the annuity fund will generally approve an annuity loan because the repayment is secured by the annuity itself. Due to the many advantages associated with annuity loans, they are becoming more and more popular today as a viable way to obtain much needed money.