In the past, banks were known to be very inflexible when it came to loans for retirees.
But today, with the banks competing with each other for more customers, the increase in the purchasing power of seniors favors the demand for credit from retirees within these lending establishments. This is not the only financial concern of seniors, as you can see by clicking on the link.
The loan criteria for retirees
As with anyone applying for a loan, the main things the banks look at first are the income and expense levels and the documents that make up the loan record. When a retiree applies for a bank loan, these rules do not really differ from those of a salaried worker.
It is more than probable that a retired person will have a relational history with the bank with which he makes a request; many retirees can thus have investments, a mortgage and savings with their bank, without forgetting of course the credit cards they hold and good overdraft facilities, which will be reflected in their credit scores.
These factors will all be taken into account by the bank when a retiree wants to borrow, depending on the amount of money they are looking to borrow and the repayment schedule they are considering.
Loan approval requirements
The justifications required when a retired person requests a loan, however, differ from an employee. In the case of a young employee, he must generally present copies of bank statements and proof of regular income such as payslips or income statements. For retirees, proof of income documentation will take the form of a copy of details of pension or retirement income.
Some banks may be willing to finance loans with just a state pension as collateral, but these loans are likely to have higher interest rates. As such, banks are not overly concerned with the sources of income; they are more interested in the level of your income and the length of time you will continue to receive this income.
Some retired people who have invested wisely and accumulated a substantial annual income may have more money to come than just an employee, for example. If you are, there is no reason why your bank is not lending you money.
Use of property as mortgage
When retirees take out loans, banks can use their real estate as a mortgage. If you own your own home or pay a mortgage, then you will be able to use this property as collateral when applying for a bank loan. Remember, if you use your home as collateral, the bank may have the right to repossess and sell your home if you can no longer honor your monthly payments. This rule is not specific to bank loans for retirees who use their home as collateral, it applies to anyone who mortgages property.