Pension loans in Canada

As Canadians head into their golden years, their income sources shift into government-provided benefits, such as Canada Pension Plan (CPP) and Old Age Security (OAS), and/or a private pension. If these are your only sources of income and you’re looking for a loan, you may find your options are more limited compared to when you were actively employed, but you still have options.

Whether you’re looking for a personal, payday loan or cash advance, there are several pension loans in Canada available to seniors.

To get approved, you’ll just need to show the lender that you have enough pension income to repay the loan. You can do this by providing bank statements from the last 60 to 90 days.

Jump to:

• Personal loans
• Payday loans
• Cash advances

Compare personal loans for pensioners in Canada

The providers of personal loans below accept full-time pension as valid income.

Compare payday loans for pensioners

These Canadian payday loan providers service seniors by accepting pension income as a valid source of income.

Compare cash advances for pensioners in Canada

These cash advance providers in Canada also accept pension income.

Where can you get pension loans in Canada?

Canadians looking for loans while on pension income can qualify with select personal loan providers, payday loan lenders and cash advance apps. While traditional banks in Canada may also accept pension income, you’ll typically need to have good credit and a low debt-to-income (DTI) ratio to get approved.

Option 1: Personal loan for pensioners in Canada

Consider personal loans if you need financing on pension income for higher loan amounts or a longer loan term than you’d find with payday loans and cash advances.

Personal loans in Canada typically come with a loan terms as short as 3 months or as long as 5 years. Although the average personal loan rate in Canada is 9.32%, interest rates can range between 6.99% for excellent credit and up to 46.96% for bad credit.

Eligibility requirements of personal loans for pensioners

While requirements vary from lender to lender, you’ll generally need the following:

• Steady pension income. The lender will want to see that you have regular pension income being paid to you via direct deposit.
• Low DTI ratio. This is the percentage of monthly debts you pay out of your monthly income. You typically need a DTI under 40% to get approved. Some alternative lenders can approve a higher DTI, but they’ll charge higher rates because they would consider you a riskier borrower.
• Good credit score. You’ll need a credit score above 660 to get competitive rates. If your credit score is below this, you can still get approved by an alternative lender specializing in fair or bad credit loans, but be prepared for higher rates.

Types of personal pension loans in Canada

While it may be a bit harder to secure a personal loan via a traditional lender with just your pension and OAS income, online lenders are readily available to offer pension loans in Canada. As a pensioner, your personal loan options vary from secured and unsecured loans to lines of credit and installment loans. Here’s a closer look at each option and its key features:

• Secured loans

  If you need a larger-sized personal loan, a secured personal loan may be your best bet, especially if you’re retired and sitting on a nest egg. Secured loans involve some sort of collateral that acts as insurance for your lender in case you default on your loan. In this case, it could be your home equity or your car that you’ve already paid off. With collateral on the line, you’ll secure the lowest interest rates and you’ll have a wider range of pension loan lenders to work with.

• Unsecured loans

  Unsecured pension loans in Canada come with higher interest rates because they don’t require any form of collateral. Without an asset acting as insurance on your pension loan, your lender will rely more heavily on your credit score and monthly income to determine your eligibility for a loan.

  Having solely your pension and OAS income won’t stop you from securing these loans from online lenders. LoanConnect, Spring Financial, Loans Canada and SkyCap are just some of the online lenders that fund loans to Canadians with a pension. Watch out for steep interest rates that can be on par with credit cards and payday loans.

• Installment loans

  Installment loans are a type of personal loan offered by alternative lenders. The only difference is that they tend to have lower loan amounts, higher rates and easier eligibility criteria.

  Examples of lenders include Cash Money, Magical Credit and easyfinancial. You’ll need to show proof of a stable source of income, which includes pension and OAS benefits.

• Personal line of credit

  A personal line of credit works almost like a credit card, giving you a specified credit limit to use however you like. While personal loans give you a lump sum of funding that you need to repay within a fixed amount of time, a line of credit stays open as long as you keep up with repayments.

  The funds are there for you whenever you need them, and interest is only charged on what you withdraw. LendDirect is just one of many online lenders that provides lines of credit to borrowers with less than perfect credit.

• Cosigned loans

  A last-ditch option for borrowers relying on just their pension and OAS income is to ask a family member or close relative to cosign on your loan application and act as a guarantor. This guarantor must accept responsibility for repaying your pension loan if you default on the payments (and their credit score suffers when repayments aren’t made on time).

Compare personal loans for pensioners

Option 2: Payday loans for pensioners in Canada

Payday loans are another option for pension loans in Canada. They are fast and easy to get because of their lenient eligibility requirements. Many payday lenders accept pension as a valid source of income, and they can also approve pensioners with bad credit.

What you should know about payday loans for pensioners in Canada

It’s worth noting that payday loans cap out at just $1,500 and must be repaid within 62 days. Payday loans are also a very expensive way to borrow, where you could end up paying anywhere from $14 to $17 for every $100 borrowed.

As pensioners, it’s important to ensure you have the money to make the full loan repayment when the time comes, and you’ll have enough left over to pay for other expenses.

Eligibility requirements of payday loans for pensioners

You can get approved for a payday loan using your CPP, OAS or other type of pension as long as it’s recurring. The only way you may not get approved even if you have pension income is if your existing debts and expenses are too high. If your bank statements show lenders that you may not have enough pension income to repay your loan, they may not approve you.

Can I get payday loans for pensioners with no credit check?

Yes, some lenders in Canada offer offer payday loans for pensioners with no credit check, like Money Mart and Pay2Day. But keep in mind that even if a payday loan provider does do credit checks, they tend to have lenient eligibility requirements and you may still be able to qualify with a bad credit score.

Dive deeper: No credit check loans in Canada

Compare payday loans for pensioners

Option 3: Cash advance apps for pensioners

Cash advance apps allow you to access a small loan to help you get through until your next payday that typically must be paid back with your next paycheque. You pay no interest on these cash loans, but you may pay a monthly subscription fee.

It’s possible to access money on the same day in some cases, often for a fee, but funding may take up to three business days in normal circumstances. These types of apps tend to be capped at $150 or $200.

Eligibility requirements for cash advance apps

These are the most basic requirements you’ll need to meet to be eligible to get a short-term loan from pay advance apps:

• Be the age of the majority in your province
• Have an active bank account
• Meet minimum income requirements
• Legal resident of Canada

Compare cash advance for pensioners

What incomes do lenders accept for pension loans in Canada?

All lenders want to see that you can comfortably pay back your loan and still pay for expenses in life such as food, housing and other debts.

While many lenders require you to be employed, lenders of pension loans in Canada will accept other forms of income such as:

How do the different types of pension incomes work?

No matter what type of pension loan you’re considering, it’s helpful to understand the various types of seniors and retiree income. Here is breakdown of how some common types of pension income work.

CPP

Canada Pension Plan is the monthly income Canadians receive once they hit retirement age. Throughout your working years, you will have contributed small amounts to your Canada Pension Plan. Some employers also contribute to your CPP, which will likely mean you’ll receive a higher amount than someone who’s employer did not contribute.

OAS

Old Age Security provides additional retirement income to people of a certain age after they retire from their careers. Unlike CPP, Canadians don’t pay into OAS directly from their income during their working years. Instead, it’s funded out by federal tax revenues.

Private pensions

You may have also contributed to a private pension, either through your job by funneling your personal savings into a private RRSP. You’ll still receive both CPP and OAS in addition to being able to withdraw from your private pension.

How to apply online for a pension loan in Canada

To apply for a pension loan online, fill out an application form with your name, contact info and income details. Depending on the lender, you may be required to go through instant bank verification so that the lender can provide a quick decision.

With bank verification, you connect your bank account to provide the lender with view-only access to your bank statements. If you’d rather not go through bank verification, some lenders allow you to upload or email your documents.

Basic eligibility criteria for pension loans in Canada

While basic eligibility criteria can vary between providers, it usually includes the following:

• Be a Canadian citizen or a permanent resident.
• Have an active bank account.
• Meet the minimum income requirements.
• Meet any minimum credit score requirements.

Required documents for pension loans in Canada

Documents may include the following:

• Bank statements from the last 60 to 90 days
• Government-issued ID
• List of assets and debts if you’re applying to a financial institution

Bottom line

Even if you’re no longer in the workforce, you can still apply for a pension loan in Canada. Many lenders accept OAS, CPP and private pensions as valid income, which means if you’re able to make your loan repayments and you meet the other eligibility requirements, you could be approved.

Want to learn more about loans? Head to our personal loans guide here.

Frequently asked questions about pension loans in Canada

• Can I use my pension as collateral to get a loan?

  Funds in a locked-in retirement savings plan (RRSP) cannot be used as collateral, according to the Pensions Benefits Standards Act, 1985 and the Pension Benefits Standards Regulations, 1985 (BPSR). However, funds unlocked in accordance with the PBSR can be used at your discretion.

  Assets like your home equity or car are more common items used as collateral for secured loans.

• What if my pension benefits are less than the lender's minimum income requirements?

  If your pension benefits are less than the lender's minimum income requirements, you may not be eligible to apply for that specific loan. Contact the lender or find a different lender that has more lenient eligibility criteria or lower loan amounts.

• What are my options for pension loans with bad credit?

  If you have bad credit and you're counting on your pension to get a loan, you still have options on the table, but they'll be limited. For starters, you'll need to narrow your scope to lenders that provide bad credit loans and then look through their eligibility requirements to make sure they accept pension.

  Payday loans are more likely to accept pension income than other types of loans. Many payday lenders don't focus on where your income is coming from. Instead, they prefer that you show them that you have stable income streams on hand to make repayments on your loan.

• Are personal loans considered taxable income?

  Unless you borrow money to purchase an investment where you'll make income, then no, a personal loan is not tax deductible.