Looking for a loan?

Compare loans for pensioners with Money Expert now to find great rates.

Find a loan

in partnership with Freedom Finance Logo


Last updated: 16/10/2020 | Estimated Reading Time: 4 minutes

Loans for Pensioners

Did you know you can still take out a loan if you’re retired? Well, you can! But there are a few important nuggets to consider before you do.

In This Guide:

Benefits of Loans for Pensioners

When we reach retirement, it’s not uncommon to have most of our finances tied up in assets. And if you need an injection of cash for a purchase (you know, to start enjoying your well-earned relaxation time), keeping your assets invested is preferable to releasing equity from your house, for example.

As such, taking out a loan can be a great alternative, particularly if you’ve got a good credit history and interest rates are low.

However, if you apply for a loan, you need to prove you can pay it back. And ordinarily, that’s done by showing your income. So, when you’re not on the payroll, what else do lenders accept?

What income is accepted?

Fortunately, many forms of income are accepted when you apply for a pensioner loan. Let’s first look at types of pensions.

If you’ve been making National Insurance contributions throughout your working life, then you’ll be in receipt of a state pension. Alongside this, you may have a personal pension, (also known as a money purchase pension) which you arrange and pay in to yourself. And last, there’s employer retirement benefit, which some employers offer to their staff; how much you receive is up to them. All of these types of pensions are accepted as forms of income when it comes to applying for a loan.

But in addition, you may have rental income from a buy-to-let property or have dividends; these are also accepted as income. Even further, perhaps you have a part-time job which would cover the loan repayments – this would, of course, be proof.  

In sum, lenders will accept multiple forms of income as part of your loan application – they’re checking to see that you can keep up repayments. Just to note, if you’re in receipt of disability benefit you can still apply, but housing benefit is not an acceptable form of income.  

How to Apply for Pensioner Loans

When you’re ready to make an application, there are many ways to proceed dependent on your preferences. You can apply in person or via phone, though doing so online can be the most straightforward as well as offering the broadest range of deals. Use our loan comparison tool to see what’s available – it’s really easy to sort results by interest rates, so you can be sure you’ll find something cheap.

If there’s a deal you like, you can apply directly through us. The lender will ask for some personal information, as well as proof of your income – whether that’s through pension payments, assets or a part-time job – and information on any debts you have.  And remember, read the terms and conditions before you apply to know you’re in with a good chance of being accepted.

Can I take out a loan against my pension?

It’s possible to take out a loan against your pension, but we’d exercise caution doing this. It’s an extremely expensive way to borrow money as the rates of interest can be jaw-dropping. Essentially, you sign over your monthly pension payments in exchange for the loan, which can last anywhere between five to ten years. Plus, you may be obliged to purchase a life insurance policy with it, further increasing the cost. We strongly advise you carefully consider all your options before taking out a loan against your pension.

Loans for Retired People: Top Tips to Apply

When you compare loans, there are a few things to keep in mind.

As far as you can afford, choose a short loan term. Although the rate of interest and your monthly repayments will be higher, you’ll pay back less overall and will be in debt for a shorter period of time, so the best loans strike an affordable balance. However, you want to neither underestimate nor over-estimate your living costs, so be sure you accurately calculate how much you need and can afford to pay back.

Carefully look at the terms and conditions before you apply. Many loans for pensioners come with a maximum age limit – so don’t put in an application that’s sure to be rejected, or you may harm your credit score. And never, ever lie about your age on an application!

If you only need to borrow a small amount, consider a credit card instead, which can sometimes be better for short-term borrowing.