Are you too old for a personal loan?
It’s a sad question to have to ask, especially if you are desperate for financing. But unfortunately, there is an age limit for loans. In Malaysia, age restrictions vary, depending on the type of loan and repayment tenure.
For personal loans, you may typically borrow up to the age of 55 to 65 (inclusive of the financing period), depending on the bank and product. But apart from the age issue, the question of income may be even more important when it comes to loans of any kind.
A retiree without any income will find it difficult to secure financing for one very valid reason – how will you repay the loan? However, if you are still earning and within the ‘loanable’ age, there’s no reason why you can’t successfully apply for a personal loan.
Retired pensioners vs non-pensioned retirees
It is somewhat easier for a retired pensioner to get a personal loan than it is for a retiree without a pension plan or other income.
This is because banks are (understandably) much more willing to extend a loan to someone with a secure, regular income like a pension. Moreover, several schemes or special personal loans exist specifically for pensioners (more on this in the next section.)
Personal Loans for Pensioners in Malaysia
Pensioners have two very interesting personal loan options offered by local banks, they are:
This loan comes with a high financing amount of up to RM100,000 or up to 15 times an applicant’s gross monthly pension.
More importantly, it does so at a highly affordable flat profit rate; from as low as 4.79% p.a., with conditions.
Also, no guarantor is required and the repayment tenure may stretch for as long as 10 years, so repayments can be adjusted for affordability.
With just a minimum gross pension amount of RM750 per month, government employees aged 40 years and above may apply for this personal loan.
Much like the Bank Rakyat loan, this personal loan also offers a high financing limit of up to RM100,000, with repayment tenure of up to 10 years.
The main difference is the profit rate – RHB offers a flat rate from as low as 5.25% p.a., with conditions.
How non-pensioned retirees can boost loan approval chances
As mentioned, if you are retired and without any other type of steady or regular formal income, it’s going to be tough to get a personal loan.
But permanent employment is not the only form of ‘regular income’.
In fact, consistent remunerations as a business partner/director, annuity payments and royalty earnings, etc. may be considered as well.
If you aren’t able to produce any form of income, you may need to think seriously about taking on a part-time job with a regular salary to boost your chances of securing a loan.
Here are a few more ways to bolster your application and up the odds on getting approved:
1. Pledge collateral
A secured personal loan i.e. one that’s ‘secured’ with some form of collateral might be a better bet for a retiree.
This way, the bank is not taking on all the risk and may be more open to offering you a loan.
You may pledge collateral in the form assets that you own.
Things like a healthy fixed deposit account or property would make for good collateral but remember, if you don’t keep up with the repayment, you could lose the asset.
2. Get a guarantor or co-signer
Another way to improve your chances for a personal loan is to apply with a co-signer or guarantor. Getting a close relative or friend with good credit to guarantee a loan, however, might not be so easy.
This is because; standing guarantor or co-signing a loan represents a major financial commitment. And most people aren’t willing to take on unnecessary risk.
3. Find the right type of loan
As a retiree or pensioner, your financial circumstances are going to be different than that of a thirty-something, employed applicant. Thus, you’ll need to find the right type of loan that caters to your needs.
For instance, certain banks have special loan products tailored for pensioners and retirees like the ones mentioned above.
4. Apply to more than one bank
Since each bank has its own way to evaluate the creditworthiness of an applicant, you might want to apply to more than bank. This way, if one bank rejects your application you might still have another chance.
Better yet, if you receive more than one approval, you can use it to compare rates and terms to get the best package.
Other options to source for cash
Now if for any reason you don’t want to take out a personal loan but still need the money – don’t fret – here are a few more options to access cash:
1. Refinance your property
If you own property, consider refinancing to extract cash from equity that has been built.
In some ways, a refinance is better than a personal loan because the rate is lower, typically 4% to 5% p.a., whereas a good rate for a personal loan is 7% to 8% p.a.
But there is a drawback – you can lose your property if you don’t repay the refinancing loan.
2. Pulling out cash from an insurance plan
If you have an investment-linked insurance plan (ILP) with a savings or cash value built, consider withdrawing a small portion for use.
3. Withdrawing from retirement funds
But do calculate the dividend earnings you may be losing as compared to the financing interests you could be saving, before withdrawing.
4. Government aid
If your situation is dire, you may qualify for financial assistance from the government under the 1Malaysia People’s Welfare Programme.
If none of these methods work, you might want to consider applying for a personal loan.
Submit a strong application and you may just get the cash you need, without having to depend on others.
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