How to Borrow Against Annuity – 5 Things you Need to Know to Make it Happen

An annuity is a form of financial product offered by financial institutions and companies, usually insurance companies wherein the company is set to make payments to the customer in the future in exchange for a lump sum payment or a series of payments. The payment to be made by the company normally will only cease upon the death of the customer or the annuitant. This is the point upon which the contract will end unless there are beneficiaries or other annuitants that have been named in the contract. Annuities are usually purchased for providing income in the period of retirement. If you have an annuity and you might have some immediate need for money but you have no other source, then you might want to turn to turn to your annuity. After all that is your money.

Here are some steps on how to borrow against annuity:

1. Call the administrator of the policy for your annuity. Usually that will be your insurance company. You need to confirm with them if what you have is a qualified annuity. A qualified annuity is one that has been designated by the IRS as a retirement account. That is the first thing that you have to do before anything else.

2. Next, you need to ask the administrator if they allow loans. If the answer is positive then find out the interest rate for borrowing. Those are things that you should have inquired about when you were just about to sign up for the annuity, but most people don’t’ think ahead like that. Get the specific forms for borrowing against an annuity and fill in the needed information. Submit the sheet with all the complete information in it. If you are married you need to get consent from your spouse since this move will directly impact them.

3. The good thing when borrowing against your annuity is that there is no credit checks to be done. As we have said, the money in the annuity is yours after all.

4. Remember that the IRS allows you to borrow up to half of your annuity. You might want to think about doing that carefully though since you might be risking a huge amount of your retirement money that you’ll end up needing when you retire.

5. Make sure that you pay off the loan within five years which is the time set by the IRS. You need to pay it off during that time period in order to avoid any complications that might affect your retirement money.

Knowing that you can borrow against your annuity as well as how to borrow against an annuity can be a reassuring thing to know, but it should be something done only as a last resort. If you can find other means of getting the amount of money needed for whatever is your emergency, then use that method before you even think of using your annuity. In case your administrator does not allow borrowing from your annuity and you really need the amount then you might have to transfer it to a different provider. Some administrators though will even allow you to take more than one loan as long as it does not go over the percentage that has been set by the IRS.