Loans for pensioners and retired people
Even once you've stopped working you may find you need to borrow money as a pensioner. Find out how you can get a personal loan if you’re retired or over 65.
Use the table below to see the age requirements set out by a number of UK lenders, along with their minimum income requirements and whether or not they accept pension income. Table sorted by upper age limit.
What's in this guide?
- What is a retired or pensioner loan?
- Can you get a loan if you're retired or on a pension?
- What do lenders consider when you apply for a loan?
- What type of loan can retirees get?
- How much can a pensioner borrow?
- What is the maximum age limit for a loan?
- Can I get a loan against my pension?
- What can you use a retired loan for?
- What to consider before getting a loan in retirement
- What are my remortgage options when I'm retired?
- How to apply for a pensioner loan
- How long will it take to get a retired loan?
- How do repayments work on personal loans for retired people?
- Alternatives to loans for pensioners
- Pros and cons of loans for retired people
- Bottom line
- Frequently asked questions
What is a retired or pensioner loan?
This is any personal loan or other form of finance that can be taken out by someone who is currently retired or on a pension. Some lenders also offer specialised types of loans that are designed for older homeowners, such as equity release.
Pensioner loans jargon explained
Age limit. The maximum age you can be to be eligible for a certain loan. For some lenders, this will be the maximum age you can be when the loan terms ends, while for others it may be the maximum age at the time of application.
APR. The annual percentage rate (APR) takes into account the headline interest rate you’ll pay, plus any charges or fees. However, lenders only have to offer the advertised APR to 51% of those who take out the loan, so you may end up getting a higher rate.
Capital. Also known as the “principal” or “loan amount”, this is the original sum borrowed.
Unsecured. A loan which does not use an asset such as property as collateral.
Can you get a loan if you’re retired or on a pension?
Yes, it is possible to get a personal loan if you’re a pensioner or retired, with most major UK lenders accepting loan applications from customers who are on a pension. However, your options may be a little more limited compared to someone who is earning a regular salary. You may also find it harder to get approved for larger loan amounts unless you’re prepared to use an asset as security against your loan.
Retired people can pose a greater risk for lenders as, without a regular salary, they may struggle to meet their repayments. As a result, lenders may either offer higher rates to older borrowers, shorter terms, or simply refuse loan applications altogether.
However, some lenders recognise that retired people may make good candidates for a loan if they meet other criteria and will consider applications on individual merit. Many retired people have assets that are more valuable than their incomes, such as equity in the family home. Lenders can choose to take this into account and offer loans secured against your house, rather than more typical unsecured personal loans.
What do lenders consider when you apply for a loan?
When you apply for a loan, lenders will take a number of factors into account before deciding whether to let you borrow, including your income.
Most lenders will accept pensions as a form of income, whether that’s the state pension, a defined contribution or personal pension (those that you contribute to yourself) or a defined benefit pension (those based on your salary and how long you’ve worked for your employer).
Additionally, lenders will look at whether you earn income from a part-time job, while rental income from buy-to-let properties or dividends from investments may also be considered. The more income you have to cover your loan repayments, the more likely you are to get accepted. Keep in mind that housing benefit is not usually classed as income and won’t be counted.
Your age can also affect whether you get approved for a loan. Many lenders set a maximum age for loan applications or restrict the loan’s term so that it is paid back before you turn a certain age.
Your chances of getting accepted for a loan will also be higher if you have a good credit score and have managed repayments on other types of credit well. It’s harder, though not impossible, for older borrowers with poorer credit to access loans, but they might need to consider secured rather than unsecured loans. If you’re applying for a secured loan, you’ll need assets such as a property or vehicle to use as collateral. If you are unable to repay the loan, the lender could repossess these assets.
What type of loan can retirees get?
Unsecured loans for pensioners
Unsecured, personal loans are the most popular loan option. They allow you to borrow a fixed sum of money that you repay over a fixed term, with fixed monthly payments. Unsecured loans generally come with higher interest rates than secured loans, but they don’t require you to use an asset as security.
Secured loans for pensioners
Secured loans can be particularly suitable if you’re a pensioner or retiree who now has a lower income, but owns a lot of equity in their home or in other assets. Secured loans typically allow you to borrow much larger amounts compared to an unsecured loan and interest rates are usually more competitive. Repayment terms can also be longer, helping reduce the size of your monthly repayments.
However, secured loans should be considered carefully. If you are unable to keep up with your repayments, the lender could repossess your asset to recoup the money.
With an equity release mortgage, you can release the equity in your home without having to make any repayments. You simply roll up the interest on the loan, which is then payable on death, or you can choose to repay the interest monthly. Equity release mortgages are suitable in some circumstances but affect your spouse and children’s inheritance so require careful consideration.
Credit cards also offer certain advantages over personal loans. If you need to make a large purchase, you could take out a credit card with a 0% interest period, which will allow you to pay off the expense over several months without incurring interest.
Alternatively, a money transfer credit card lets you transfer a portion of your credit limit across to your bank account. Unlike a regular personal loan, it’s possible to borrow money using a credit card without ever having to pay interest, provided you pay off your balance in full each month.
Payday loans for pensioners
Payday loans are high-interest loans over short periods of up to one month. They can be attractive if you need to borrow funds fast. However, APRs are much higher than for other forms of credit and they should only be considered as a last resort.
How to choose the right type of loan
To decide which loan type is best for you, calculate how much you need to borrow and how much you can afford to repay. Then work out which type of loan is best suited to your financial and personal situation.
How much can a pensioner borrow?
This will partly depend on your income. If you have limited income, you may find that a lender is less willing to offer you a larger loan amount.
However, it will also depend on whether you are applying for an unsecured or a secured loan. For unsecured personal loans, you’ll usually be able to borrow up to £25,000 or £30,000, although some lenders offer loans of up to £50,000.
For secured or homeowner loans, you may be able to borrow up to £500,000 depending on the lender. You will also need to use your property as security against the full cost of the loan. However, the actual amount you can borrow on a secured loan is limited by what’s known as the loan-to-value (LTV) ratio. This is the ratio between the size of the loan amount and the value of your house.
For example, if a secured lender only offers loans up to a maximum LTV of 70%, you’ll only be able to borrow 70% of the total value of the equity you own in your home. This means you wouldn’t be able to get a loan for £500,000 if your home is only worth £200,000.
As with any loan, it’s important to only borrow as much as you can afford to repay, and don’t borrow more than is necessary.
What is the maximum age limit for a loan?
The age limit is usually the maximum age at the start of application, but it may also refer to the maximum age you can be when the loan term ends. The maximum age limit will vary depending on the lender, but is often between 70 and 75.
Can I get a loan against 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. You’ll usually be asked to sign over your monthly pension payments in exchange for a loan that lasts between five and 10 years.
This type of loan is similar to a payday loan in terms of expense, with APRs easily topping 100%. You may also have to buy a life insurance policy with it, making it even more costly.
What can you use a retired loan for?
There are a number of reasons you might want to take out a retired loan. For example, you could use it to consolidate existing debts, such as credit cards and loans, into one monthly payment. Not only can this be more manageable, it can also work out cheaper.Alternatively, you might want to fund the purchase of a new car or home improvements, or maybe you want to pay for the holiday of a lifetime.
What to consider before getting a loan in retirement
There are a number of things to consider before applying for a loan in retirement. For a start, consider whether you would be better off with other types of borrowing, such as a credit card.
You should also think about whether you really need to borrow the funds and if so, whether you can afford to repay the amount you wish to borrow. Ask yourself if there are likely to be any other large outgoings in the near future that could affect your ability to repay the loan or that could require you to borrow more.
If you decide a loan is right for you, always check the eligibility criteria carefully to make sure you qualify. As part of this, it’s worth checking your credit score as you’re more likely to be accepted for a loan if you have a good credit history. To keep your interest bill down and clear your debt as quickly as possible, it’s best to go for the shortest term and highest repayments you can manage.
What are my remortgage options when I’m retired?
If you own your own home, you could use this equity to secure a loan – in other words take out a mortgage. Typically, mortgage lenders will consider borrowers who are between 70 and 85 when the term ends, but this varies. If you’re already paying off a mortgage, then a second charge mortgage may be an option, however you’ll need sufficient income to cover day-to-day living costs plus the repayments on your borrowing.
Dos and don’ts of loans for retired people
- Keep your credit history squeaky clean by paying all bills, such as mobile phone bills or store cards, on time.
- Go for the shortest term and highest repayments you can manage, to keep the interest bill down and to clear debts as quickly as possible.
- Check your eligibility – particularly the maximum age when the loan term ends, before applying. If you make an application that is subsequently rejected, this will be recorded on your credit file and you might not be able to make another loan application for a few months.
- Consider different types of borrowing – for example, whether or not you’d be better off with a credit card.
- Consider whether there is likely to be any other large outgoings cropping up in the near future that would require further borrowing or put an extra strain on your income.
- Borrow more than you need.
- Underestimate your living costs when calculating how much you can afford to repay.
- Apply for more than one loan at a time.
- Lie about your age.
How to apply for a pensioner loan
- Compare your loan options to find the right loan
- Apply for your loan online or at a branch if your lender has them
- Provide basic details such as your name, address, date of birth, whether you’re a homeowner, and what
you need the loan for, plus details of your pension payments, debts and open credit accounts
- Wait for the lender to check your credit history via credit reference agencies
How long will it take to get a retired loan?
A loan application typically only takes around 15 minutes, although this varies depending on the lender. Your loan could then be approved and funded in as little as a couple of hours, or it may take up to two to five business days, depending on the type of loan.
How do repayments work on personal loans for retired people?
When you borrow through a personal loan, you pay back the amount borrowed in fixed monthly instalments. By choosing a longer loan term, your monthly repayments will be smaller. However, this also means that you’ll pay more in interest over the term of the loan. Providing you can afford higher monthly repayments, it will work out cheaper in the long run to choose a shorter loan term.
Elaine & David
Elaine and David have paid off their mortgage and retired. Their home is worth £400,000, they earn a basic joint income from their pensions of £28,000, but don’t have other savings. Nor do they have any other debt. They want to help their daughter buy a new car by giving her £6,000 to put towards it. They are 70 and 72 years old.
After tax, their joint monthly income is £1,800 approximately. The couple could take out a loan over 5 years, with an APR of 7%, giving repayments of £120 a month, leaving them enough to cover their outgoings. A shorter term of three years would give monthly repayments of £180, which would still be affordable to the couple.
Pensioner loan cost comparison
Loan amount: £5,000
- Loan term: 3 years
- Interest rate: 19.9%
- Monthly repayment: £181
- Total interest: £1,533
Loan amount: £5,000
- Loan term: 3 years
- Interest rate: 29.3%
- Monthly repayment: £201
- Total interest: £2,250
Alternatives to loans for pensioners
There are several alternatives to retired loans that you may want to consider:
- Equity release. Products such as lifetime mortgages and home reversions allow you to access the equity (cash) tied up in your home if you are over the age of 55. You can take the money you release as a lump sum or in several smaller amounts, or as a combination of both.
- Secured loans. These are loans in which the debt is backed by an asset belonging to the borrower. However, if you fail to repay the loan, the lender can repossess the underlying asset.
- Guarantor loans. Some lenders will allow a guarantor for personal loans who agrees to back up a borrower’s loan and steps in to make payments if the borrower doesn’t. The guarantor will need to have a good credit history and could be a friend or relative.
- Car finance. If you’re looking to borrow money to fund a vehicle purchase, you may wish to consider a car loan. There are different forms of finance available to suit a variety of circumstances.
- Remortgage. If your property’s value has increased since you bought it, you could take out a new, larger mortgage to cover the higher value and benefit from the extra money. Many lenders offer mortgages to those in their 60s and 70s, but the lender will need to check whether you can afford the mortgage before lending to you. You should also factor in the cost of any fees you’ll pay to remortgage.
Pros and cons of loans for retired people
- You can typically borrow a large sum of money.
- Repayments are often fixed, making it easier to budget.
- You can choose how long you need to repay the amount borrowed.
- Interest rates are often competitive.
- You can keep your assets invested.
- Payments are not flexible.
- You may be offered a smaller loan if you have limited income.
- If you have a poor credit score, you may pay a higher interest rate.
- Secured loans require you to use an asset as collateral.
Applying for a loan can be a good option for those who need extra funds in retirement, particularly if you have a good credit history and interest rates are competitive. However, it’s important to check eligibility criteria carefully and make sure you never borrow more than you could afford to pay back.
Frequently asked questions
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