As you move into your older years, your finances change with your lifestyle. When that happens, you may find that getting a loan isn’t as easy as it was when you were earning an income from employment. However, there are lenders that will consider you for a loan as a retiree. But just be aware of the costs some loans might have and the impact borrowing at a late stage could have on your retirement funds.
9 types of loans for retired people in Canada
If you’re hoping to take out a loan as a retired senior, you can look into these 9 options.
1. Home equity loans or lines of credit
If you own a home, you can use the equity of your home (the difference between the property value and the mortgage balance) to get a loan. Your home will act as collateral.
A home equity loan is a lump sum that you pay back in installments over time. With a home equity line of credit (HELOC), you can borrow up to a pre-set limit, and you can borrow as much or as little as you’d like. You can pay back what you owe at any time, but you must pay the interest on the amount you borrow.
Because you’re using your home as collateral, home equity loans and HELOCs tend to have lower interest rates than other types of loans.
Compare home equity loans and HELOCs
Click on the tabs to see your options.
2. Personal loans
A personal loan can be either secured or unsecured. Secured means putting up collateral, such as your savings. Unsecured means the loan has no collateral, but it also means higher interest rates than secured loans since the lender is taking on more risk. Some lenders offer up to $50,000, but you may not have access to this large amount if you don’t have the liquid assets to back it up and an excellent credit score.
3. Personal lines of credit
A line of credit is similar to a personal loan. But instead of receiving a lump sum, you’ll be able to draw from your line, up to a pre-determined limit, whenever you need it. Interest will only apply to the amount you borrow. A line of credit can be particularly useful when you aren’t sure how much you need in advance. Learn more about personal lines of credit.
Compare personal loans and lines of credit for retirees
4. Peer-to-peer loans
Peer-to-peer loans are personal loans funded by regular Canadian investors rather than banks or institutional lenders. An online marketplace will anonymously connect you with Canadians who can finance your loan. You can usually get competitive interest rates and favourable loan terms, but you need a good to excellent credit score to qualify.
Get a peer-to-peer loan
5. Debt consolidation loans
If you’re looking to combine your debt from multiple places into one single loan with a lower interest rate, some loan options are specifically tailored for the purpose of debt consolidation. A debt consolidation loan can help save you money on interest and fees across multiple loans.
6. Cosigned loans
If you’re having trouble getting approved for a loan on your own, consider asking a family member with a higher income and solid credit score to cosign for you on the loan. A cosigner can also help you get more favourable loan terms or qualify for a higher loan amount. But keep in mind that a cosigner is tied to your loan, so if you default on your loan, your cosigner’s credit score will also take a hit and they will be required to cover your payments.
7. Car loans
If you’re looking to purchase a new or used vehicle, you can get a car loan. These types of loans offer competitive interest rates because the vehicle you purchase is used as collateral.
8. Reverse mortgages
A reverse mortgage is a loan where you borrow money using your home equity. Instead of a traditional mortgage where you make payments to the lender, the lender makes payments to you based on a percentage of your home’s value. Over time your debt increases as the lender buys more of your home’s value. You continue to own the home, but the moment you move out, sell it, default on the loan or pass away, the loan needs to be repaid. The lender sells the home to get back the money that was paid to you, and whatever is left goes to you or your heirs.
Two financial institutions offer reverse mortgages in Canada: HomeEquity Bank and Equitable Bank. To be eligible, you must be a homeowner and at least 55 years old.
9. Payday loans
A payday loan is small amount of money you borrow (up to $1,500) that needs to be repaid by your next “payday”. Payday loans, whether you are retired or not, are extremely expensive and should only be a last resort. They also have different regulations depending on which province you live in. Learn more about payday loans.
⚠️ 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
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)|
What types of retirement situations do lenders look at?
When you borrow money as a retiree, having a form of income is necessary since you have to be able to prove that you can pay back the loan. Lenders want to see that you can comfortably pay back your loan and still pay for necessities in life such as food, housing and utilities.
- Self-funded retirees. If you earn income from investments, such as rental properties or a private pension, you’re a self-funded retiree. When applying for a loan, make sure you have as much proof of your assets and income as possible to prove to the lender you’ll be able to manage the loan repayments.
- Retirees receiving Canada Pension Plan (CPP) and Old Age Security (OAS). Be sure to check the eligibility criteria of the lender – not all consider CPP and OAS as a form of income. Having a private pension on top of CPP and OAS will help prove that you can manage repayments.
- Retirees who work part-time. If you have steady employment – even if it’s only part-time – this income will be considered by lenders. Remember minimum income criteria may apply, so check this before submitting your application.
Questions to ask yourself before applying for a loan
Calculate your personal loan monthly paymentCalculate how much you could expect to pay each month
|Loan terms (in years)|
How to apply for a loan as a retiree
Once you’ve compared lenders that accept pension, OAS and/or investment income as forms of acceptable income, you’ll need to make sure you meet the other eligibility criteria. You’ll also need to gather documents and then apply online.
Can I get a loan as as senior with bad credit?
If you’re a retiree with poor credit, it’s still possible to get a personal loan. Some lenders will only offer loans to those with bad credit up to a maximum amount, like $5,000, while others will offer more. Keep in mind you will often pay high interest rates with bad credit loans, since you’d be considered a riskier borrower. Compare personal loans for bad credit.
How to increase your chances of approval as a retiree with bad credit
- Review the eligibility criteria. Before you apply for a loan, check if you meet the eligibility criteria. See whether the lender accepts the type of income you have, and look for things like minimum income and credit score.
- Consider a joint application or cosigner. If you don’t meet the credit score requirements, consider applying with a cosigner or another applicant.
- Submit all necessary documents. Check what documents are needed and make sure you’re able to submit everything that is required, such as your CPP or OAS statements.
Even if you’re no longer in the workforce, you can still apply for a loan as a retiree. Many lenders accept investment income, OAS, CPP and private pensions as forms of acceptable income, which means if you’re able to make your loan repayments and you meet the other basic eligibility requirements, you could be approved for the funds.
Want to learn more about loans? Head to our personal loans guide here.
Frequently asked questions about getting loans for retired seniors
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