Are there any income requirements when applying for a loan as a pensioner?
Some lenders might have a minimum income requirement in place as part of their eligibility criteria. This doesn’t necessarily need to be in the form of a wage; some lenders could be willing to class certain types of benefits or pension payments as a form of income.
Could I still be considered for a loan if I am retired and living on my pension?
Yes, you could be considered.
Predominantly, a lender will take a look at your income to determine whether or not you are likely to be able to afford repayments. Your income might include private and state pensions, as well as wages from any part-time jobs.
Your credit score will also be taken into account – as a general rule, those with a higher credit rating are more likely to be approved for a loan.
A low credit rating will impact your chances of being approved for a loan, no matter your age.
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Is there a maximum age limit on applying for a loan?
There might be, but this will depend on the lender you apply with. Many lenders state that the maximum age limit on personal loans is 70, although some may consider those up to the age of 75.
Looking for a loan if you are over the age of 70 may present limited choices, and it is rare to find a lender willing to offer a loan to anyone over the age of 75.
Could I get a loan if I’m a pensioner and I have bad credit?
You could get a loan if you’re receiving your pension and have bad credit history, although your borrowing options may be limited.
A bad credit loan could come with a higher interest rate, which will increase the overall cost as well as your monthly repayments.
There’s also a chance that you might not be approved to borrow the amount of money that you need.
What documents will I need to provide when applying for a loan as a pensioner?
When you apply for a loan as a pensioner, you may be asked to provide the following information and documentation:
- Proof of identity; for example, a passport or driving licence.
- Proof of address.
- Your overall monthly pension income from all applicable sources; for example, private and workplace pensions.
- A recent pension statement.
- Evidence of any other type of income, including benefits.
- Your credit score; and
- Details of any existing borrowing commitments.
If I am approved for a loan, how much money could I get?
Your borrowing options will depend on various factors, including your income and credit score. Having a larger pension income may also increase the amount lenders may be willing to offer you.
Every lender has different requirements, so if you do decide that a loan is a good option for you, it’s worth shopping around for the terms and rates that suit you best.
You should never apply to borrow more money than you need or can afford. You’ll need to consider how a loan will impact your monthly budget; you should be confident that you can repay your loan without it affecting your ability to cover the cost of your monthly essential outgoings, such as any mortgage or rent, bills, and food.
Why might someone think about applying for a loan during retirement?
Your pension may be generating a lower income than you were used to while working, and because of this, saving up can take longer.
A loan could help to alleviate this situation by providing a sum of cash to put towards an urgent cost, such as a packed-up boiler or car.
What are the disadvantages of taking out a loan during retirement?
While saving up will typically take longer, it will actually be more cost-effective in the long run. This is because taking out a loan results in having to pay more than the amount borrowed due to monthly interest rates.
Regardless of your age, the key thing to ask yourself when debating whether to take out a loan is this: are you going to be able to comfortably make the monthly repayments? If there is any doubt in your mind, you shouldn’t make a decision that may put you in financial jeopardy.
You should be aware that if you take out a loan and make a late repayment or miss one altogether, your credit score will decline. Your lender may also charge you a fee.
What happens to my loan if I pass away with a balance still outstanding?
If you pass away, the loan will still need to be repaid to the lender. The most common solution is for the money to be taken from your cash and assets (known as your ‘estate’).
This will reduce the money left to your beneficiaries.
If you pass away and the loan was taken out in your name only and you have no assets, your debt will be written off. Your surviving relatives will not be expected to make the repayments.
What if I pass away and I have a joint loan in place?
If you pass away before the joint loan has been repaid, the other loan holder will become solely responsible for the loan and will need to make the pre-agreed repayments.
Is there more of a risk involved in taking out a loan as a pensioner?
Whatever your age, the risks of taking out a loan remain the same. Failing to make or falling behind on the required repayments are possibilities that you need to think about very carefully before making a commitment to a financial product.
How can I boost my credit score and improve my chances of being approved for a loan?
- Check over your credit report and make sure that all details are correct. Even something as simple as a typo in an email address could lower your credit rating.
- Assess any joint bank accounts that you currently have. Being financially associated with someone with a low credit score (for example, if you have a joint account) can actually impact your own credit rating.
- Ensure all bills are paid on time.
- If you have made attempts to get access to credit but have been turned down, refrain from immediately applying with other lenders. Making several applications over a short period of time could lower your credit rating.
- Another option to boost your credit rating could be to get a credit-building credit card. By making purchases on these cards and paying them off every month, you are proving that you can make your repayments reliably and comfortably.
Are there any other alternatives I could consider instead of a loan?
- If you’re facing an unexpected financial emergency, could a trusted family member or friend help you out? They may offer to provide the funds you need at a lower rate of interest than a mainstream lender, or with no interest at all. It’s crucial that both parties agree on and stick to a repayment plan.
- A credit card is a type of borrowing, and thorough research should be carried out before you decide whether to apply for one. There are different types of credit card, covering a range of needs. For example, a 0% purchase credit card comes with a set period of no interest, meaning that during the promotional offer, you’ll only repay the money you’ve spent, plus any applicable fees. Please note that once the promotional period comes to an end, any remaining balance will be subject to interest at the standard rate. You can find out more about credit cards in our guide.
- A pension loan is when you borrow money against the value of your pension fund. This works like a secured loan, which is when a borrower takes out a sum of money and secures it against an asset, such as their car or home. This is referred to as ‘collateral.’ If the borrower defaults on their loan repayments, the lender could seize the asset and sell it to recover their costs. There are significant risks involved with a pension loan, and you may wish to seek financial advice before you commit to this type of borrowing. We’ve included some organisations that offer free financial support at the bottom of the page.
If you’re worried about money…
If you’re experiencing money worries, then it’s important to reach out for help. Discussing money – especially with those we are close with - can sometimes feel a bit uncomfortable, but this needn’t be the case. Money worries are something that many of us will face in our lifetime, and there’s no shame in asking for a little additional support. During the current cost-of-living crisis, it is really important that we speak up if things are getting too much. Remember that help is out there. For free, confidential advice and support, visit Citizens Advice, National Debtline, Money Helper and StepChange.
Not sure if you need help? Take the free StepChange 60-second Money Health Check.
