Compare loans for retirees

While there’s no standard definition of a loan for seniors, or people over the age of 62 who qualify for retirement – people at this stage of life may need a personal loan for emergency expenses, medical bills, special equipment and more.

Some lenders will consider you for a personal loan even if you’re no longer employed. But be aware of the costs some loans carry and the impact borrowing at a late stage could have on your retirement funds.

7 types of loans for seniors

Even if you no longer have job income, you may still qualify for a number of loans, provided you have Social Security benefits, a pension or a retirement fund.

Here are eight types of loans available to retired people:

Personal loans

Banks, credit unions and online lenders offer personal loans ranging from $1,000 up to $100,000. Personal loans can be secured or unsecured, but most personal loans are not backed by collateral. Instead, you need to show regular income to prove you can pay back the loan.

Personal lines of credit

A line of credit falls somewhere between a personal loan and a credit card. Like a loan, you can access cash instead of credit, making it ideal for home improvements and other projects. And, like a credit card, you get access to a credit limit that you can withdraw from as needed. This can be useful when you have ongoing and unpredictable expenses. Since credit lines tend to have lower rates than credit cards, it can also be a more economical way to finance a vacation and other large expenses you can’t pay upfront.

Reverse mortgages

Reverse mortgages offer a line of credit, a regular income stream or a lump sum payment by borrowing against your home’s equity. Instead of making monthly mortgage payments, a reverse mortgage pays you. However, this reduces the equity in your home and comes with risks.

Home equity loans and HELOCs

A home equity loan or line of credit lets you borrow against the equity in your home to access funds that can be used for any purpose. Home equity loans and HELOCs may offer lower rates than personal loans, since they’re backed by collateral and present less risk to the lender. But you could lose your home if you can’t pay it back.

Cash advance apps

Also known as pay advance apps, cash advances offer advances on retirement income with no financing charge, usually up to $250 per deposit. They’re a low-cost alternative to payday and installment loans, though you may need to sign up for a monthly membership, which can cost as much as $10 per month. And there’s also a fee to receive funding the same day.

These apps are relatively new, and some users may find them a little difficult to navigate. But it may be worth it if you find yourself regularly short on cash due to a misalignment between your income and bill frequency. If you’ve had trouble using apps before, look for one with a customer support number that you can call to walk you through the process.

Bridge loans for seniors

Bridge loans are a type of short-term financing designed to cover — or bridge — brief gaps in funding. Elderlife Financial Services is one lender that provides unsecured bridge loans between $5,000 and $500,000, which you pay back over a few months to just over a year.

Payday alternative loans

Some federal credit unions offer two types of small-dollar loans as an alternative to high-cost payday and installment loans. The National Credit Union Administrate sets limits on how much a lender can charge on these loans:

• PALS I are available from $200 to $1,000 with terms from 1 to 6 months and rates capped at 28%. You must be a credit union member for at least one month to qualify, but there are no overdraft or nonsufficient funds fees.
• PALS II are available in amounts up to $2,000 with terms from 1 to 12 months and rates capped at 28%. You can get a PALS II as soon as you join your credit union, but you may be charged an overdraft or nonsufficient funds fee if you miss a payment.

The main drawback to PALs is that they aren’t as widely available as more-expensive financing options.

Financing options for veterans and people on disability

Whether you are retired from the military or simply served the country, you may have loan options you aren’t aware of. Some lenders, like Navy Federal Credit Union and USAA, cater to veterans. Other lenders may have special deals or lower interest rates if you provide proof of your service. You could benefit from a personal loan for veterans, and in many cases, spouses are also eligible.

If you are on disability (SSI/SSDI), it’s best to start by comparing lending options for people on disability that may be easier to qualify with.

Loans for seniors with bad credit

If you have poor credit – say a score under 580 – some lenders offer loans to seniors with bad credit. For example, Avant, Upgrade and Upstart may consider your application if your score is below 580, but you have to show that you have a regular income.

You’ll pay a higher interest rate if your score is less than optimal, and expect to have origination fees tacked on to your loan by most lenders. Origination fees can run anywhere from 1% to 10% of the total loan amount.

Protections against lending discrimination for retirees

The Equal Credit Opportunity Act makes it illegal for lenders to consider your age or the type of income you receive when you apply for a loan. However, your age and retirement status may still affect your ability to get a loan. Here’s how:

• Credit scoring systems may consider your age as a factor. But in most cases, this works in favor of applicants over 62. A higher credit score may make it easier to meet lender requirements, get lower rates and fees, and access higher loan amounts.
• Lenders may consider the availability of your retirement benefits or income when deciding whether to offer you a loan. If you receive income that’s set to expire before the loan term is up, they can legally deny your application.

Types of retirement income lenders consider

Lenders are legally required to consider a range of income sources when you apply. As long as you have a steady source of income — whether through assets, a part-time job, disability or retirement benefits — you may qualify for a loan.

Here are income sources many lenders consider:

• Annuities and other income. If you have income from investments like annuities, rental properties or a retirement savings account, you’re referred to as a self-funded retiree. When applying for a loan, document these sources of income thoroughly.
• Pension or Social Security income. You may still qualify for a personal loan if you receive a pension as income. Be sure to check the lender’s eligibility criteria, as not all accept pension or Social Security benefits.
• Employment income. If you have part-time income on top of any investment or retirement funds, this can help bolster your application. Lenders will look at the type of employment and how long you’ve been doing it.
• Public assistance. In addition to Social Security, lenders must consider benefits like Supplemental Security Income, unemployment compensation and the Supplemental Nutrition Assistance Program.

Also, the majority of lenders will require you to be a US citizen or permanent resident to be eligible for a loan, but some lenders will consider nonresident seniors for loans.

What you need to apply for a loan

While every lender is different, be prepared to provide the following information:

• Personal information. Your name, date of birth, Social Security number and contact details.
• Income information. All sources of income, including proof of direct deposits, retirement award letters and bank statements.
• Debts. You’ll also need to provide information about your current debts.

If the eligibility criteria aren’t clear, contact the lender before submitting your application. For example, if your investments have inconsistent income, you might not meet the minimum income criteria.

And to give yourself the best chance of being approved, make sure you have all your information on hand before applying.

Other sources of financial assistance for seniors

There are multiple federal, state and local programs that offer financial assistance to those between the ages of 60 to 65 and up with low to moderate income. Assistance may be available for food, housing, utilities, health care, in-home care and more.

To find out what you may qualify for, visit the BenefitsCheckUp website from the National Council on Aging. Enter your zip code and the types of benefits you’re interested in to see what programs are available in your area.

Bottom line

Living on a fixed income doesn’t necessarily disqualify you from getting a loan. But your monthly repayments will impact your budget. When choosing a lender, look for the lowest rates and fees possible, and be open to other options – like benefits for seniors – if you need ongoing assistance for living expenses.