When reaching retirement age, it’s not uncommon for people to have their wealth tied up in a property and a private pension. And whilst this can provide a substantial nest egg, your ability to raise cash for larger spending can be more limited, whether paying for a holiday, home improvements or buying a car.

If you have a regular income from your pension and a good credit score, a loan can be a great option. Here, we explain more about loans for pensioners. We’ll look at whether loans have an age limit, what lenders look for in older borrowers, and if you can get a loan in your retirement with bad credit.

Can I get a loan if I’m retired?

Yes, you can get a personal loan if you’re retired. Lenders will judge each loan application on a case by case basis. They will look to see if you have an income and are otherwise judged to be a low financial risk.

If you have a regular pension, other income – such as from a rental property or investments – a good credit history, and supporting assets, you’ll increase your chances of securing a loan.

Some lenders will be less willing to lend to older customers however, and may offer shorter term loans or loans with higher interest rates. It pays to shop around when looking for a loan. At Asda Money we work with a carefully selected panel of trusted UK lenders that offer loans from £1,000 to £25,000 across one to seven years. Whilst they don’t offer specialist loans for pensioners, you may find a loan that suits your needs.

Do loans have a maximum age limit?

Most lenders will set a maximum age limit on their loans, but this varies by company. Some set an age limit of 70. Others may lend to customers up to 85 years of age, although this is rare. Again, it pays to compare loans where possible. At Asda Money, there is no specified age limit on the loans offered by our panel of trusted UK lenders.

Lenders will also set a minimum income requirement for loans, and your pension and other sources of income will need to meet this minimum. 

Should I get a loan if I’m a pensioner?

Whether a loan is right for you as a pensioner will depend on your individual circumstances and financial position.

You should only borrow money you can afford to pay back. If you have a regular income and are in a comfortable financial situation, then a loan can be an excellent way to fund a larger purchase. Use our loan calculator to better understand your potential monthly repayments and how this would fit with your monthly budget.

If you’re in any doubt about your ability to repay a loan, it may not be right for you. Missed payments and non-repayment of a loan can involve fees and other charges. You may end up getting into financial difficulties and it can harm your credit score.

What are the advantages and disadvantages of loans for pensioners?

Advantages

• A loan gives you access to a lump sum of money that would take time to otherwise save for.
• Loans are repaid in monthly instalments, making monthly budgeting easier.
• You can’t easily extend the amount you borrow with a loan (unlike credit card borrowing), reducing the risk of borrowing more than you can afford to.

Disadvantages

• Because you’ll pay interest on the money you borrow, a loan will be more expensive than saving up the same amount of money.
• If you miss repayments, you run the risk of incurring further charges and harming your credit score.
• If you were to die before the loan has been repaid it will be deducted from your estate, reducing the amount of money you pass on to your beneficiaries.

What do lenders consider when borrowing in retirement?

Just as with a younger customer, a potential lender will review your financial position and your credit history to make a judgement on how well you can repay a loan and the level of financial risk you’ll represent.

Lenders will take into account how much income you earn, from pensions and other sources, and how stable that income is. They may ask for a representative monthly budget from you, where you indicate your income and tell them your monthly outgoings.

A potential lender will run a credit check on you to see your credit history, including how much money you’re currently borrowing, how much you’ve borrowed in the past and how reliably you’ve repaid it.

A lender will typically also want to know what you’re borrowing money for.

Can I get a retirement loan with bad credit?

Having a bad credit history will make securing a loan more difficult, as you’ll be judged as a greater financial risk. But it’s not impossible.

You may be offered a loan from a specialist lender that provides loans to customers with low credit scores. These may come with stricter terms (borrowing less money and/or for shorter periods) and higher interest rates.

How much can I borrow as a pensioner?

The levels of borrowing available to you as a pensioner depend on your personal circumstances. Factors like your age, income and credit history will all play a part.

Typically, the higher your income and the better your credit score, the more you’ll be able to borrow. This will vary by lender. If you’re over 70 – especially if you’re over 75 – it can be harder to secure a loan, but some lenders will lend to you.

You should never borrow more money than you can afford to repay. You can use our loan calculator to get a better idea of how much you’d be repaying each month with different levels of borrowing at different interest rates.

What happens to a loan if I die?

If you die with a loan unpaid, it will still need to be repaid. Typically, the outstanding loan amount is deducted from your estate (your total cash and assets), meaning the beneficiaries in your legal will then receive less.

What are alternatives to loans for retirees?

Loans are one option for accessing funds, but you do have others available to you. If you need to borrow a smaller sum of money, you should consider the following:

• Credit card
• Credit union loan
• An authorised, no-fee overdraft
• Borrowing from family members

If you need to borrow a larger amount, and you own a property, you could consider selling and downsizing to a smaller home to release some of its equity. Alternatively, you could look into equity release options.

Whatever option you decide on, review as much information as possible to make sure you understand the details of a loan or financial arrangement, so you can make an informed decision. Speaking to an independent financial advisor is a sensible step, if you have that option available to you.

Can I borrow against my pension?

If you take out a personal loan, your lender will consider your income including your pension. A larger income generally means you can borrow more money.

You can also take out a dedicated pension loan, where you borrow money against the value of your pension fund as an asset. A pension loan is a type of secured loan. 

How Asda can help

Effectively managing your finances is always crucial, especially in the latter stages of your life. But financial matters can sometimes be confusing.

At Asda Money, we offer free, impartial advice and support on all things money through our Financial Support. Whether you need help understanding terms with our jargon buster or you want to check your financial health, we’re here to help. Plus, we work with a panel of trusted UK lenders to help you find the right personal loan for your needs.

Compare loans using a trusted panel of lenders today.