Retirement is meant for living a peaceful life and enjoying the wealth accumulated during your work life. However, you may have to resort to borrowing if you fall short of money in your retirement years.

So, here are the top-5 loan options that senior citizens could explore to fulfil their money needs in retirement.

Loan Against Securities

Loan against securities is one of the best ways to raise money against your existing investments. You can pledge your mutual funds, shares, endowment life insurance policies, and eligible small savings schemes with the bank as collateral for securing a loan.

Usually, banks allow around 50-80 per cent of the underlying securities’ value as the loan amount. The rate of interest on a loan against securities depends on the type of the underlying security and repayment tenure that you opt for.

Loan Against Property

If your loan requirement is big and you are looking for a long-term repayment option, you may consider mortgaging your existing residential property with the bank for a loan.

Banks usually allow a loan against property up to 50-80 per cent of the value of the property. The rate of interest depends on factors, such as the loan-to-value (LTV) ratio, loan tenure, and credit score of the borrower, among others.

Pensioner Loan

You can also get an unsecured loan, which is similar to a personal loan, from the bank. The bank will decide the loan amount eligibility and the repayment tenure on the basis of your pension income and age. The rate of interest on pensioner loans is typically higher than that offered on an unsecured loan, but you can still get a good deal if you compare the various options before applying for a loan.

Overdraft Facility Against Bank FDs

Are you looking for a loan that offers repayment flexibility and a lower rate of interest?

Well, you can use your existing fixed deposit (FD) with the bank for an overdraft (OD). The bank will typically charge you a rate of interest around 0.5-2 per cent over and above the underlying FD rate.

For instance, if your FD is offering a rate of interest of 7 per cent per annum, the rate of interest on the overdraft taken against that FD will be around 7.50-9 per cent per annum. In an OD against FD, the interest is calculated on a daily basis on the outstanding amount. Also, there is no prepayment penalty in such type of OD facility.

Reverse Mortgage

Are you looking for a loan option that gives you the option of a lump sum amount as well as a regular income similar to an annuity?

You can get such an option in a reverse mortgage loan, wherein the bank allows the loan in a lump sum or regular payment. At the end of the tenure, the borrower or their legal heir gets the option to repay the outstanding amount, or allow the lender to seize the property to recover the money.

Typically, banks don’t charge any prepayment penalty on reverse mortgage loans, and the rate of interest is also lower than what is charged on most other types of loan options.

Before choosing your loan option, compare the various loan products offered by different lending institutions, including the rate of interest and fees, and select the one that matches your loan repayment as well as the amount that you require.

The author is an Independent Financial Journalist