As Canadians head into their golden years, their income sources shift into government-provided benefits, such as Canada Pension Plan (CPP), Old Age Security (OAS) and/or a private pension. If these are your only sources of income, and you’re looking for a loan, you may find your options are more limited compared to when you were actively employed, but you do have options.
Option 1: Personal loans
What types of income are acceptable?
When you borrow money, lenders need you to show proof that you have some form of income since you have to be able to pay back the loan. Some lenders have minimum income requirements, while others insist that your income must come from an employer. Overall, lenders just want to see that you can comfortably pay back your loan and still pay for necessities in life such as food, housing and utilities.
While some lenders require you to be employed, others will accept forms of income such as:
- Private pensions
- CPP and OAS
- Personal investment income
- Employment insurance
- Other government benefits
What types of pensions are considered by lenders?
- CPP. Canada Pension Plan is the monthly income Canadians receive once they hit retirement age. Throughout your working years, you will have contributed small amounts to your Canada Pension Plan. Some employers also contribute to your CPP, which will likely mean you’ll receive a higher amount than someone who’s employer did not contribute.
- OAS. Old Age Security provides additional retirement income to people of a certain age after they retire from their careers. Unlike CPP, Canadians don’t pay into OAS directly from their income during their working years. Instead, it’s funded out by federal tax revenues.
- Private pensions. You may have also contributed to a private pension, either through your job by funnelling your personal savings into a private RRSP. You’ll still receive both CPP and OAS in addition to being able to withdraw from your private pension.
Types of personal loans that accept pension
While it may be harder to secure a personal loan via a traditional lender with just your pension and OAS income, online lenders are readily available to help you get the funding you need. Your personal loan options vary from secured and unsecured loans to lines of credit and instalment loans. Here’s a closer look at each option and its key features:
Option 2: Payday loans
Payday loans are another option for Canadians receiving a pension, such as the CPP or OAS. Payday loans are a bandaid solution that should only be used as a last resort because they have annual interest rates that are as high as triple digits and need to be repaid the next time you receive your pension cheque.
If you’re in a financial emergency, payday loans are available though. They’re available to Canadians in a bad credit situation and to Canadians who don’t have employment income. Instead, payday lenders insist you prove that you have steady income to repay the loan when it’s due.
It’s worth noting that payday loans cap out at just $1,500 and must be repaid within 62 days at most.
⚠️ Warning: Be cautious with payday loansPayday loans are expensive. If you're experiencing financial hardship call Credit Counselling Canada for free financial counselling (Monday-Friday 8:00am-5:00pm at +1 866-398-5999). Consider alternatives instead of a payday loan:
- Local resources. Government programs and nonprofits offer free financial services and help with food, utilities and rent.
- Debt relief companies. There are services to help you reduce your debt payments.
- Payment extensions. Talk with bill providers about longer payment plans or due-date extensions.
- Side jobs. Sell unwanted items online, sign up for food delivery and more.
Compare payday loans for CPP, OAS or private pension
Maximum borrowing costs per provinceAlways refer to your contract for exact repayment amounts and costs as they may vary from our results.
|Province||Maximum allowable cost of borrowing|
|Alberta, British Columbia, New Brunswick, Ontario & Prince Edward Island||$15 per $100 borrowed|
|Manitoba & Saskatchewan||$17 per $100 borrowed|
|Nova Scotia||$19 per $100 borrowed|
|Newfoundland and Labrador||$21 per $100 borrowed|
|Northwest Territories, Nunavut & the Yukon||$60 per $100 borrowed|
|Quebec||Limit of 35% annual interest rate (AIR)|
How to apply for a loan when you’re receiving a pension
Once you’ve compared lenders that accept pension as a form of income, you’ll need to make sure you meet the other eligibility criteria. You’ll also need to gather documents and then apply online. You can apply online for a loan in the table above by clicking the green ‘Go to site’ button, where you’ll be securely redirected to the application page.
Even if you’re no longer in the workforce, you can still apply for a loan. Many lenders accept OAS, CPP and private pensions as a form of acceptable income, which means if you’re able to make your loan repayments and you meet the other eligibility requirements, you could be approved.
Want to learn more about loans? Head to our personal loans guide here.
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