Ten or twenty years ago, we’d have been unlikely to have had much need for popular loans for pensioners with bad credit. People were able to either:
- save for retirement throughout their working lives
- invest in good quality pension plans that set them up for their old age, or
- access the State pension that comfortably covered the basic cost of living
It’s understandable then, that most of us have a dreamy notion that once retirement comes around, it’ll mean it’s time to put the feet up and relax into a slower, less financially demanding pace of life.
Affordable loans for pensioners
However today, people are living longer, healthier lives, and wanting to pack more into their twilight years. Alongside this desire to see and do more, the basic cost of living is increasing every year…while State and private pensions are failing to keep up. It’s becoming clear that life – and access to affordable borrowing – doesn’t pause when people stop working.
For many pensioners, once they retire, it leaves plenty of free time to tick off bucket list goals like travel the world, seeing and doing all the sights they were too busy to do when working. Often taking the grandkids along for the ride too, as multi-generational holidays become more and more common. Without savings to fall back on, a holiday loan for the over 65s can be an affordable way to spread the cost of your travels.
For many others, borrowing is more of a necessity than to afford luxuries. The Social Metrics Commission 2019 report highlights that despite a fall in pensioners living in poverty, there are still 1.3million pension age adults living in poverty and unable to meet the basic cost of living.
This has led to a spike in the number of pensioners borrowing to boost their pension pot and increasing numbers of over 65’s needing access to loans and re-mortgages or equity release each year.
Age UK, the leading charity for older people, report that there are currently over 12 million people aged 65 in the UK and by 2030, one in five people in the UK will be aged 65 or over. This means that banks, building societies and loan providers need to take a serious look at how they approach lending to pensioners. Customers over 65 have been previously overlooked for Personal Loans, due to misplaced risk assumptions related to their age and reduced incomes.
Online lenders a lifeline for over 65s looking for a loan
Whilst mainstream lenders have been quick to overlook pensioners, many online lenders have proven to be a lifeline to the over 65s, offering a range of options, such as:
- Guarantor loans
- Shorter term Personal Loans
- Risk related interest rates
- Equity release on their homes
- Loans secured on property or other assets,
Credit union lenders in particular, are more likely to consider applications on individual merit, bypassing automated lending decisions and asking an underwriter to assess the application in detail and discussing options with the applicant. Similarly, an online loan broker will have access and specialist knowledge to a range of lenders and understand whose lending criteria is most accessible to the over 65s.
What about pensioners with poor credit?
If you’re over 65 with a less than perfect credit score, it doesn’t mean that you won’t be able to apply or be approved for an unsecured loan. There are a number of options open to you. Once of the most popular loans for pensioners with bad credit is a guarantor loan.
What is a Guarantor Loan?
A Guarantor Loan is a form of borrowing that allows individuals with poor or average credit scores to access affordable credit. It means that a trusted friend or family member steps in to co-sign the credit agreement, effectively guarantees the loan repayments, in the event that you – the main applicant – can’t afford to repay.
The loan is still in your name, and as the main borrower, you are responsible for monthly repayment. However, the lender has an additional degree of security as they can seek repayment from the Guarantor in the event you can’t or don’t repay.
For pensioners with a limited income, lack of recent borrowing history or a less than perfect credit score, a Guarantor Loan can prove a lifeline for accessing credit at a lower rate and fairer terms. Other, less favourable routes to accessing credit may include having to secure lending on property or release equity from other assets.
Who should I ask to be a Guarantor for my loan?
The main criteria for finding someone to co-sign your application for a Guarantor Loan varies from lender to lender. Broadly speaking, they should be a friend or family member you trust well enough to discuss your private financial circumstances, but who is financially independent of you. So for example, your spouse cannot be your loan Guarantor, but a long term partner you don’t share a joint account with, a friend, son or daughter, siblings or grandchildren could be. A quick Guarantor checklist is that they should be:
- A friend or family member
- Financially independent from you
- Have a good or fair credit rating
- Aged between 21 and 75
- Live and work in the UK, with a UK bank account and a UK debit card.
Why do I have a bad credit score?
All financial transactions, from applying for a credit card and how you manage your bank account to your mobile phone monthly payments are recorded on your credit report.
Before you apply for any loan, it may be beneficial to view your credit report via a credit reference agency like Equifax or Clearscore to help you understand the factors that are impacting your credit score.
Once you understand the factors impacting your credit score, you can take steps to rectify any issues or errors. Meaning it’s easier to borrow in the future without relying on a guarantor.