Usually, senior citizens are suggested to avoid a new loan after their retirement, but it’s also important that they stay ready with borrowing options to meet all kinds of financial emergencies. It’s not easy for a retired person to get an unsecured loan, but some banks in the market allow personal loans for pensioners that can be very useful to arrange money whenever there is a financial emergency. Here’s how personal loans for pensioners work.

How Personal Loans For Pensioners Work?

Personal loan for pensioners is allowed for individuals whose age is above 60 years. A Pensioner loan is similar to a personal loan but with a slight difference. Under a pensioner loan, the bank determines the loan eligibility based on the pension amount received by the individual after deducting existing loan obligations, if any. When applying for a personal loan for pensioners, the bank usually requires documents like proof of pension income, other income proof (if any), ID cards, etc. If your pension income is insufficient for the required loan amount, the bank may still lend you money if you pledge collateral security such as gold, fixed deposit, LIC policy, etc. The bank may ask for a guarantor or a co-borrower for securing the loan. The tenure of a loan is usually up to 72 months and a maximum till the final repayment age of 78 years; however, the tenure may vary from bank to bank.

Interest Rate On The Personal Loan For Pensioners

Interest on personal loans for pensioner ranges around 10.25 per cent to 12.80 per cent per annum. Here’s the list of banks that offers personal loan for pensioners and their interest rate:

Things To Keep In Mind When Applying For A Pensioner Loan

A Pensioner loan should be used as a tool to overcome financial emergencies when there are no other options left in hand to arrange the fund. Senior citizens should avoid borrowing more than their exact requirement. After taking a loan, you should repay equated monthly instalments (EMIs) on time and avoid repayment default at all costs. It’s always better to read the fine print of the loan agreement before you sign it. Beware of the charges involved in the personal loan such as processing fees, documentation charges, late payment fee, prepayment fees, etc., and choose the lender that offers you the best deal.

The author is an Independent Financial Journalist