As Canadians head into their golden years, their income sources shift into government-provided benefits, such as Canada Pension Plan (CPP) and 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 still have options. Whether you’re looking for a personal or payday loan, there are several pension loans in Canada available to seniors.
To get approved, you’ll just need to show the lender that you have enough pension income to repay the loan. You can do this by providing bank statements from the last 60 to 90 days.
Compare loans for pensioners in Canada
The providers of personal loans below accept full-time pension as valid income.
Where can you get pension loans in Canada?
You can get pension loans from some alternative lenders and financial institutions. Financial institutions have stricter requirements – you’ll need good credit and a low debt-to-income (DTI) ratio to get approved. Alternative lenders, on the other hand, have more flexible requirements, but their rates for pension loans are typically higher.
What incomes do lenders accept for pension loans in Canada?
All lenders want to see that you can comfortably pay back your loan and still pay for expenses in life such as food, housing and other debts.
While many lenders require you to be employed, lenders of pension loans in Canada will accept other forms of income such as:
Private pensions (Sun Life, Blue Cross, Manulife, etc.)
Canada Pension Plan (CPP)
Old Age Security (OAS)
Guaranteed Income Supplement (GIS)
Ontario Teachers’ Pension Plan (OTPP)
Personal investment or retirement income
Other government benefits
Eligibility requirements of personal loans for pensioners
While requirements vary from lender to lender, you’ll generally need the following:
Steady pension income. The lender will want to see that you have regular pension income being paid to you via direct deposit.
Low DTI ratio. This is the percentage of monthly debts you pay out of your monthly income. You typically need a DTI under 40% to get approved. Some alternative lenders can approve a higher DTI, but they’ll charge higher rates because they would consider you a riskier borrower.
Good credit score. You’ll need a credit score above 660 to get competitive rates. If your credit score is below this, you can still get approved by an alternative lender specializing in fair or bad credit loans, but be prepared for higher rates.
How do the different types of pension incomes work?
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 funneling 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 pension loans in Canada
While it may be a bit harder to secure a personal loan via a traditional lender with just your pension and OAS income, online lenders are readily available to offer pension loans in Canada. As a pensioner, your personal loan options vary from secured and unsecured loans to lines of credit and installment loans. Here’s a closer look at each option and its key features:
If you need a larger-sized personal loan, a secured personal loan may be your best bet, especially if you’re retired and sitting on a nest egg. Secured loans involve some sort of collateral that acts as insurance for your lender in case you default on your loan. In this case, it could be your home equity or your car that you’ve already paid off. With collateral on the line, you’ll secure the lowest interest rates and you’ll have a wider range of pension loan lenders to work with.
Unsecured pension loans in Canada come with higher interest rates because they don’t require any form of collateral. Without an asset acting as insurance on your pension loan, your lender will rely more heavily on your credit score and monthly income to determine your eligibility for a loan. Having solely your pension and OAS income won’t stop you from securing these loans from online lenders.LoanConnect, Spring Financial, Loans Canada and SkyCap are just some of the online lenders that fund loans to Canadians with a pension. Watch out for steep interest rates that can be on par with credit cards and payday loans.
Installment loans are a type of personal loan offered by alternative lenders. The only difference is that they tend to have lower loan amounts, higher rates and easier eligibility criteria.
Examples of lenders include Cash Money, Magical Credit and easyfinancial. You’ll need to show proof of a stable source of income, which includes pension and OAS benefits.
A personal line of credit works almost like a credit card, giving you a specified credit limit to use however you like. While personal loans give you a lump sum of funding that you need to repay within a fixed amount of time, a line of credit stays open as long as you keep up with repayments. The funds are there for you whenever you need them, and interest is only charged on what you withdraw. LendDirect is just one of many online lenders that provides lines of credit to borrowers with less than perfect credit.
A last-ditch option for borrowers relying on just their pension and OAS income is to ask a family member or close relative to cosign on your loan application and act as a guarantor. This guarantor must accept responsibility for repaying your pension loan if you default on the payments (and their credit score suffers when repayments aren’t made on time).
Option 2: Compare payday loans for pensioners in Canada
Payday loans are another option for pension loans in Canada. They are fast and easy to get because of their lenient eligibility requirements. Many payday lenders accept pension as a valid source of income, and they can also approve pensioners with bad credit.
⚠️ Warning: Be cautious with payday loans
High-cost payday loans are unsustainable for borrowing over a continued period of time and are expensive as a means of longer-term borrowing. View payday costs and regulations by province here. 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). You may also want to consider payday loan alternatives.
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Maximum borrowing costs of payday loans per province
Always refer to your contract for exact repayment amounts and costs.
Province
Max. cost of borrowing a $100 payday loan
Cooling off period to cancel loan
Max. penalty for returned cheque or pre-authorized debit
Alberta
$15
2 business days
$25
British Columbia
$15
2 business days
$20
Manitoba
$17
48 hours excluding Sundays and holidays
$20
New Brunswick
$15
48 hours excluding Sundays and holidays
$20
Newfoundland and Labrador
$14
2 business days
$20
Nova Scotia
$15
Next business day (2 days for online loans)
$40 (default penalty)
Ontario
$15
2 business days
$25
Prince Edward Island
$15
2 business days
N/A
Quebec
Limit of 35% AIR
N/A
N/A
Saskatchewan
$17
Next business day
$25
What you should know about payday loans for pensioners in Canada
It’s worth noting that payday loans cap out at just $1,500 and must be repaid within 62 days. Payday loans are also a very expensive way to borrow, where you could end up paying anywhere from $14 to $17 for every $100 borrowed. As pensioners, it’s important to ensure you have the money to make the full loan repayment when the time comes, and you’ll have enough left over to pay for other expenses.
Eligibility requirements of payday loans for pensioners
You can get approved for a payday loan using your CPP, OAS or other type of pension as long as it’s recurring. The only way you may not get approved even if you have pension income is if your existing debts and expenses are too high. If your bank statements show lenders that you may not have enough pension income to repay your loan, they may not approve you.
Can I get payday loans for pensioners with no credit check?
Yes, some lenders in Canada offer offer payday loans for pensioners with no credit check, like Money Mart and Pay2Day. But keep in mind that even if a payday loan provider does do credit checks, they tend to have lenient eligibility requirements and you may still be able to qualify with a bad credit score.
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 pension loan in the table above by clicking the green “Go to site” button, where you’ll be securely redirected to the application page.
Basic eligibility criteria for pension loans in Canada
While basic eligibility criteria can vary between providers, it usually includes the following:
List of assets and debts if you’re applying to a financial institution
Bottom line
Even if you’re no longer in the workforce, you can still apply for a pension loan in Canada. Many lenders accept OAS, CPP and private pensions as valid income, which means if you’re able to make your loan repayments and you meet the other eligibility requirements, you could be approved.
Frequently asked questions about pension loans in Canada
Funds in a locked-in retirement savings plan (RRSP) cannot be used as collateral, according to the Pensions Benefits Standards Act, 1985 and the Pension Benefits Standards Regulations, 1985 (BPSR). However, funds unlocked in accordance with the PBSR can be used at your discretion.
Assets like your home equity or car are more common items used as collateral for secured loans.
If your pension benefits are less than the lender's minimum income requirements, you may not be eligible to apply for that specific loan. Contact the lender or find a different lender that has more lenient eligibility criteria or lower loan amounts.
If you have bad credit and you're counting on your pension to get a loan, you still have options on the table, but they'll be limited. For starters, you'll need to narrow your scope to lenders that provide bad credit loans and then look through their eligibility requirements to make sure they accept pension.
Payday loans are more likely to accept pension income than other types of loans. Many payday lenders don't focus on where your income is coming from. Instead, they prefer that you show them that you have stable income streams on hand to make repayments on your loan.
Unless you borrow money to purchase an investment where you'll make income, then no, a personal loan is not tax deductible.
Carmen Chai is a freelance writer at Finder, specializing in financial products. She is an award-winning Canadian journalist who has lived and reported from major cities such as Vancouver, Toronto, London and Paris. She has reported on personal finance, mortgages, and banking products for nearly a decade.
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