As increasing numbers of older people are living longer and retiring later, their need for affordable loans, credit cards, and other financial products continues to increase. But what about those who have experienced adverse credit in the past and who struggle to access mainstream finance from their bank or normal credit provider? The popular loans for pensioners with bad credit guide can help those with a less than perfect credit rating; access the loan products they need, when they need them.
An increased cost of living means fewer funds to save for retirement
In previous generations, it was much easier for people to save for the things they need in life and meet the cost of living, with some funds left over. Many households for example were able to get by on just one income, as opposed to today’s standards where many homes require two people bringing in a wage to thrive.
For our grandparent’s parents, many were often employed in physically demanding roles that would see them retire earlier, having built up a good retirement nest-egg to see them through their autumn years comfortably. For most, retirement was a chance to put their feet up and enjoy life on their terms.
Today however, the financial picture has shifted for our retirees. Many over 65s are unable to claim state pensions and have been unable to put away enough funds over the years to meet the current cost of living. For many, retirement age has shifted, meaning they must continue to work longer than they thought they would need to.
This can impact things like the need to run a reliable car to get them to and from their workplace, leading to the need for affordable car loans. It’s clear that the less financially demanding pace of life isn’t quite matching the image we had in our heads for retirees!
Funding a faster pace of life with affordable loans for pensioners
Additionally, feeling fitter and younger for longer, many pensioners may want to pack bucket list living into their retirement years. Travelling to far-flung destinations across the world, seeing the sort of destinations they’ve dreamed off and couldn’t get to during their working lives.
Plenty of young at heart grandparents are travelling with their own children and grandchildren too, funding their travels with their savings, credit cards or specialist holiday loans. The message is clear – life and the need for affordable borrowing doesn’t stop, just because a person is retired!
Other common loan purposes for pensioners
There are a whole host of reasons why pensioners may need access to affordable funds, fast. Some of the most common loan purposes include:
- An in-home emergency like a leak
- White goods failure / replacement
- A car breakdown or urgent car repair
- A travel crisis
- An urgent bill or invoice to be paid
What about pensioners in poverty?
Unfortunately, there are a large number of vulnerable pensioners living in poverty. For this group, accessing low cost loans can be a requirement to meet the basic cost of living, rather than to spread the cost of a crisis or to enjoy the finer things in life. Recent research by the Social Metrics Commission highlighted that there are nearly 1,300,000 pensioners living in poverty and struggling with basic living costs like food, warmth and shelter.
What this means is that many older people are taking out loans to maximize their pensions or looking at other financial options like re-mortgaging their homes or releasing equity from homes or other assets.
It’s suggested that pensioners have faced discrimination when looking for a low cost loan. Many lenders have lending criteria that’s prohibitive to retirees or the over 65s, with lenders seeing the older generations as a lending risk due to reduced income and age bracket. This is a concern for charities like Age UK who say that by 2030, at least 20% of the population will be sixty five plus. They’ve called for mainstream lenders to look at borrowing options for older citizens and how accessible their lending choices are for those over 65s.
Popular loans for pensioners with bad credit
Thankfully, there are a number of alternative borrowing options open to the over 65s when they need to borrow money in a hurry. Online lenders in particular offer a range of accessible options to retirees or those out of work. Some of these options include:
- Secured or Unsecured guarantor loans
- A Credit Union Loan
- Short-term Personal Loans
- Equity release on their homes or any other assets
- Interest rates tied to risk levels
- Credit cards advance
Credit Unions a lifeline for the over 65s
Most local communities offer credit union savings and loans products to the over 65s. With more of a human touch, credit union loans tend to be assessed by an individual underwriter, looking carefully at the applicant’s income, expenditure and loan affordability. They can also put financially strained pensioners in touch with support agencies like Stepchange or the Citizen’s Advice Bureau if it appears that they need further support.
Online Loan Brokers can also access specialist lenders who serve customers with unique borrowing needs or who welcome applicants of pensionable age. However caution is advised to make sure they are a reputable lender who are authorized and regulated by the Financial Services Authority.
To access the lowest interest rates however, a guarantor loan can often be the best option for pensioners with bad credit.
What is a guarantor loan?
A guarantor loan is a form of borrowing where an application with poor credit asks a friend or family member with a clean credit history to co-sign a loan application. Typically a guarantor loan can help the applicant access a better interest rate, keeping monthly repayments lower and more affordable. This form of borrowing can help the applicant rebuild their credit worthiness too, so long as they maintain the monthly repayment schedule. In the event that you cannot repay, your co-signer will be legally obligated to make the repayments in your absence.
For pensioners with poor credit or lack of recent lending history, it’s often preferable that they choose a Guarantor loan than secure a loan on, or release equity on their home.
You may want to a trusted friend or family member, or seek financial advice before proceeding with any of the routes to finance in this article.
Interesting related article: “What is a Pension?“