Just because you receive a pension, doesn’t mean you can’t take out a loan.
If you rely on a pension, whether it’s an employer retirement benefit or Social Security, you may find your loan options somewhat limited. That’s because many lenders require you to have a steady job to be eligible.
You do have some options, however. We take you through what those are and show you how to compare these options so you can choose the right loan for you.
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What types of pensions are considered by lenders?
Pensions in the US are offered by some employers and also by the government to senior citizens and those with disabilities.
- Employer retirement benefit. Some employers offer pensions as a retirement benefit to employees. The amount you’ll receive in retirement is calculated by a formula determined by your employer. Although many employers now offer 401(k)/403(b) retirement plans, some still offer retirement benefits in the form of a pension.
- Social Security. Social Security provides retirement income to people of a certain age after they retire from their careers. Social Security also provides disability income to people with certain disabilities who are unable to work.
There are lenders who will look at these benefits as a form of income and consider the pension payments when evaluating your ability to repay the loan.
Personal loans you may be able to apply for while on pension
How to apply for a loan on a pension
The table above can be a good starting point to find a loan for people who rely on a pension as their main source of income. You can click on the name of the lender to read a review, and you can click “Go to Site” to submit your application. If you have questions regarding your eligibility, you can contact the lender directly.
Personal loan applications are counted as inquiries on your credit report. Inquiries play a factor in your overall credit score. Lenders may also view too many inquiries as a red flag. To keep your credit in good standing and improve your chances of approval, you may want to consider limiting your number of loan applications.
To apply, you’ll need to provide personal information including your name and contact details, as well as financial information regarding your pension payments, assets, debts and open credit accounts.
Can I get an advance on my pension?
Yes, but they’re one of the more expensive options out there. These loans are typically called pension advances, pension sales, pension loans or pension buyouts. Here, you sign over your monthly pension payments in exchange for a loan — often between five and 10 years.
They’re similar to payday loans in that they’re one of the most expensive financing options out there, with APRs easily topping 100%. Some lenders also require borrowers to purchase a life insurance policy naming it as the beneficiary — an extra expense.
The Consumer Financial Protection Bureau (CFPB) warns against borrowing from a pension advance company that claims it’s endorsed by the VA: It’s illegal for lenders to take military pensions and veteran benefits. Former servicemembers are ineligible for a pension advance unless they receive a pension from elsewhere. Either way, it’s an expensive option meant for absolutely emergencies.