When you are working and have a good income, it’s easy to get a loan from the banks or the NBFCs, but after your retirement, the loan eligibility starts dropping quickly with every passing year. Similarly, senior citizens may face various problems when they plan to get a loan. The problem size may vary depending on the type of loan and the lender’s terms and conditions. So, let’s have a look at three serious problems faced when Seniors Apply For Loans.
Lack Of Regular Income To Meet The Repayment Norms
The lender usually checks the borrower’s repayment capacity before approving their loan application. Most seniors depend on interest or return earned on their retirement corpus to meet their retirement expenses. Pensioners can show their pension income to secure a loan. If you don’t have a pension income, you have to provide proof that shows a valid income source, and it should be adequate for repaying the loan EMIs. Often, the lender rejects the application due to inadequate repayment capacity.
Age Restrictions On Several Loan Products
Usually, loan products have restrictions related to the maximum age of the loan applicant. For example, in a home loan, many banks allow a loan to the senior applicant with restrictions on repayment tenure so that the applicant should not be older than 70 years at the time of repayment of the last EMI.
In a personal loan, usually, the maximum age during loan maturity should not cross 65 years; in a loan against property, the age limit can go up to 75 years; in a gold loan, the maximum age limit can be around 70 years. The age-related restriction may vary from lender to lender. So, you may check with different lenders to get some flexibility on age restrictions or to get a longer repayment period.
Insufficient Collateral For Getting A Loan
Lack of income can be a big hurdle for seniors to get an unsecured loan, but they can easily get a secured loan from banks and financial institutions. However, many seniors don’t hold sufficient or appropriate assets to put as collateral with the banks to get a loan against it. You can get a loan against assets and investments such as gold, residential property, qualified shares, mutual funds, FDs, etc.
Things Senior Citizens Can Do To Improve The Chances Of Loan Approval
When applying for a loan, senior citizens should prefer secured loans as they are offered more easily, at a lower interest rate, and with longer repayment tenure compared to unsecured loans. Avoid putting your big-value assets like property or high-value assets to get a small-ticket loan. Whether you take a big or small loan, the entire asset is usually pledged when you put it as collateral. So, for a small loan, use smaller assets as collateral, and for a big loan, you may use your high-value assets. Before applying for a loan, make sure you really need it and you are financially ready for its timely repayment.
The author is an independent financial journalist