When people go into well-deserved retirement, they often want to treat themselves to something. Some want to finally buy their dream car, others want to rebuild their house to suit their age or go on a long-awaited long-distance journey. When seniors go in search of a loan to make their wishes come true, there is often disillusionment. By no means all banks are prepared to grant a loan to people over 65. However, there are also opportunities to obtain a loan for pensioners. This article from licensed money lender Cash Mart Singapore explains what securities retirees should offer banks and how they can get a loan.
Why is it more difficult for seniors to get a loan?
Banks generally want to ensure that the loan is repaid. However, when it comes to a pensioner loan, creditworthiness plays a particularly important role. Regular income, additional collateral and a clean SCHUFA are essential aspects to receive a fair offer. But even then, pensioners often have a hard time, because:
There is an increased risk of illness or death.
In such cases, the bank believes that there is a risk that the loan taken out can no longer be paid for.
The Schufa information should be positive
Banks obtain SCHUFA information from each applicant. It is particularly important for pensioners. If the SCHUFA information has negative entries, it is only possible to obtain a loan in exceptional cases. However, if the SCHUFA report is positive and shows a high score, this has a positive effect on the chances of obtaining a loan – even in spite of a possibly older age.
Prove regular income
Banks check the borrower’s income situation and often expect the potential borrower to have at least 1,000 euros per month at his free disposal. This means that the pension must be above this 1,000 euros, as running costs such as insurance premiums and living expenses burden the income accordingly. If senior citizens can prove additional income, for example from renting and leasing or from interest income, this continues to have a positive effect on the loan.
Is there an upper age limit for the pensioner credit?
The banks handle the upper age limit for a pensioner loan differently. Some banks no longer accept applicants who are over 60 years old, while others also accept borrowers with an entry age of 79 years. In any case, the law does not set an upper limit. Practice shows that most banks no longer grant credit to persons older than 75. It is important to observe the guidelines of the banks in this respect.
Offer collateral: This increases the chance of a senior loan being granted.
It is not just about the revenue situation and the financial leeway that older customers have to prove to the bank. Banks secure the credit for senior borrowers accordingly. Which securities make sense depends, among other things, on the purpose of the loan. If the loan is to be for a car, the surrender of the vehicle is an often practiced variant. However, if the money flows into a property, other securities are available. The following loan securities can be offered to older people in order to increase their chances of being granted a loan or to obtain favourable interest rates.
The guarantee: children secure the loan
A welcome security is the assumption of a guarantee by the heirs or children of an applicant of senior age. The guarantee is concluded in the form of a directly enforceable guarantee.
Tip – Direct Debt Guarantee: This means that if the first debtor (the pensioner) defaults, the guarantor is liable for the debts and pays the instalments. A guarantor can limit the amount of the guarantee, i.e. he does not necessarily have to pay the entire amount. If several children are willing to act as guarantors, the amount can be divided among them accordingly.
Not only the children are suitable guarantors, the banks also accept friends, business partners or relatives. The direct spouse, however, is often rejected as guarantor. Not only the comparatively high age plays a role, but also the emotional connection to the applicant. Due to this emotional bond, courts regularly deny the spouse the ability to objectively rethink a guarantee.
Important: Regardless of who agrees to support the loan agreement as guarantor, the guarantor’s income and financial circumstances are also reviewed. The creditworthiness must be in order and, if necessary, securities must also be provided. The bank does not have to accept each guarantor, but it decides individually.
Why children are cheap as co-applicants
A retiree’s children are usually his heirs. If they are used as co-applicants, they assume the full risk of loan default. In principle, there is no restriction as in the case of a guarantee. In return, the children can have part of the loan paid out to them themselves, if this is desired.
This variant makes sense for loans for senior citizens, because the children have to pay the debts of their parents later anyway – unless they completely reject the inheritance. If the children are included in the loan application, this usually has a favourable effect on the term. Even if the pensioner falls seriously ill or dies before the end of the credit period, the bank has the promise that the children will continue to pay off their debts. In addition, the children usually have a higher income than their parents at retirement age.
It is important to note that the children’s creditworthiness must also be good in order to be included in the loan agreement. With a regular income and a positive SCHUFA entry, they are ideal co-applicants and thus ensure that the loan is granted on suitable terms.