Financial Thoughts

How To Apply For A Loan In Retirement

Retired Couple Enjoying a Vacation After Taking Out a Loan

While it may seemingly be impossible for the senior citizens to get loans once they have retired, there are many ways through which they can obtain loans.

The only thing that they need to avoid, according to experts, is acquiring loans through retirement plans such as pension, IRA or 401(k). That’s mainly because doing so can adversely affect your entire savings and the income you get in retirement. Instead, follow these tips to get a loan after retirement.

Assign a co-applicant

You will have a higher chance of qualifying for the loan if you get a co-applicant with a stable income flow. You can use, for instance, a spouse or a child as the co-applicant. The co-applicant does not only increase your chances of getting the loan but also increases the amount as well.

Apply for a secured loan

Secured loans are loans which use collateral as a backup. In the event when the borrower defaults the collateral or asset is sold by the issuer to cover for the loss. The secured loan is also easy to obtain for the retirees than the unsecured loans.

Use the EMI calculator

With the current amalgamation of technology in the banking and finance industry, it is possible to find out the Equated Monthly Rate (EMI) which you will pay against your loan. The retired people can use the EMI to their advantage to find out the possible outflow of their cash especially when they need to get a home loan.

Factors to Consider Before Applying for a Loan After Retirement

Cash flow

Do you have a dependable source of income which you can use to pay the mortgage? At the end of the day, the lender will need the loan to be paid back. It’s therefore essential to make sure that the amount you will borrow won’t leave you bankrupt trying to pay it.

Credit score

Nowadays all lenders consider the borrower’s credit score before they give out their money. If your credit score already allows you to get a loan, make sure that it doesn’t drop in the course of the loan.


In almost all cases, potential lenders will want to know our federal taxes worth. They might also want you to provide proof of your tax compliances. This means that you should have your tax records filed together in an orderly manner. More to that, it’s important to know the tax obligations connected to the loan you want.

Past debts

As a retiree, the probability is high that you could still be servicing other loans. The lenders will not want you to commit more than 40% of your gross income paying loans. One way of lowering your loan amounts is by paying off the car loans, credit loans and other loans which you have. This will increase the lender’s confidence in you.

Once you have considered the above factors, it’s essential to compare the different loans which can suit you better.

Which loan options do you have after retirement?

Discussed below are the common loans available for the retired people. However, if you have a specific choice in your mind, don’t hesitate to ask your lender about its eligibility criteria.

  • Personal loanspersonal loans may either be secured or unsecured. Different lenders offer different options for them, with some insisting on the secured loans. Be sure to confirm with your lender on the best option.
  • Personal lines of credit – this are similar to the personal loans, although the option allows you to draw from your line only when you need the cash, instead of relieving a lump sum.
  • Peer to peer loans – these loans are given out by investors, other than financial institutions or banks. Although they sometimes take a longer time to be funded, they are perfect for the retired people.
  • Debt consolidation loans – if you have many existing loans, you can consolidate them it with the new to make an easy payment.
  • Car loans – retiring does mean that you should move around in your car. There are many financial institutions which offer car loans to the retirees.
  • Mortgages and reverse mortgages loans – financial institutions and other lenders cannot discriminate against age especially when it comes to mortgages. Look for a reliable mortgage lender and apply for a mortgage.

Apart from the above mentioned financial aspects, other things can’t be left out, including the emotional freedom. After all, isn’t that what retirement is all about? Will the loan gives you the flexibility to do what you wish? If no, then don’t squeeze yourself into the credit.

2 thoughts on “How To Apply For A Loan In Retirement

  1. Great article!
    From my experience, I can say that Borrowing money in retirement is less difficult than it used to be. Lenders are learning how to treat your assets as income. They’re making more options available to those no longer in the workforce. Before taking money out of retirement savings, just consider the alternatives offered for good.

    1. Hi John,
      Thank you for sharing your thoughts with us! Yes, the lending industry registers a pretty dynamic evolution & lenders’ policies underwent a significant change in approaching their customers lastly. All this is to facilitate access to finance & avoid credit discrimination. However, this poses a greater necessity for the clients to take responsibility for their borrowing decisions, as all financial products have both advantages and disadvantages! Follow our blog and our education sections to stay up to date on how to achieve financial stability and keep safe while borrowing!

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