5 Important Things To Keep In Mind When Borrowing After Retirement

As you grow old, taking a loan or availing of new credit can become more challenging due to the uncertainties regarding your income, cash flow, financial soundness, and life expectancy. Several factors should be kept in mind when borrowing after your retirement

Outlook Money
May 18, 2023
5 Important Things To Keep In Mind When Borrowing After Retirement

After retirement, individuals usually depend on pension funds, savings, and investments that generate regular income to meet their financial needs. Sometimes, despite all sorts of financial planning, they may still face a liquidity crunch or fall short of financial goals. In such a situation, borrowing instruments can play a big role in financial survival. So, let’s check out the five important factors that you should keep in mind related to post-retirement borrowing.


Size Of Your Discretionary Income: Discretionary income is the money left in your hand after meeting all the necessities out of your total income. If you can manage to maintain a steady flow of income in your retirement, it gives you an added advantage to get the desired loan amount. In general, it is difficult for retirees to meet the loan eligibility criteria, but having a good size of discretionary income flow can help you secure one.

Size Of Loan EMI: You must estimate the size of the equated monthly instalment (EMI) on your loan, and also assess your repayment capacity. Availing a loan greater than what you can repay over the due course can land you in a huge debt burden. So, before taking a loan, know your repayment capacity and redraw your budget to comply with your financial needs.

Top-Up Your Insurance Cover: Your existing life insurance policies should adequately cover your debt and financial obligations. If the new debt is not covered adequately, you may take additional life cover to ensure complete protection, or you can take a loan insurance cover. Make sure that the insurance sufficiently covers the remaining EMIs. Before choosing your loan option, conduct proper research and go through the offers of various lenders for your desired loan.

Add A Co-Borrower To Your Loan: In order to fit into the eligibility criteria, you may add a non-senior citizen co-borrower to your loan. Adding a co-borrower would improve your chances of getting a loan, as the risk would get distributed, your repayment capacity would improve, and your average credit score may also increase.

Close Your Existing Small Loans: Before taking a loan, try to close your existing short-term loans, such as credit card EMI, car loan, personal loan, etc., that are maturing soon. By closing the existing loans, you increase your discretionary income, and thus improve your repayment capacity for the new loan, and consequently, improve your chances of getting a loan.

You should choose your loan scheme after duly considering every crucial factor that can play a role at the time of repayment. Don’t hesitate in taking professional advice, as the decision of taking a new loan can severely impact the rest of your retirement life.

Authored By: Yug Advisors

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