Retirement and personal loans are sensitive financial areas of your life. Have you wondered what if you need more money after or before your retirement period? Will you consider borrowing a personal loan in those times? ⭐Financial Tips ⭐Money Management
They say retirement is the longest holiday that you’ll ever take. But, unlike other holidays, this one requires you to lay the foundation of your financial security, way ahead of time. To make your twilight years free of money concerns, ensure effective financial planning, well in time. But it is true that an emergency may knock at your, uninvited. Exhausting your savings to cope up may not be a good idea, especially after retirement. Retirement is inevitable, and so is the drop in your income when you retire. So what are your options for giving that garage a quick fix or converting your backyard into a beautiful garden? Would you want to spend your hard-earned money all in one go? Or you’d rather take a loan to cover those costs and save your pockets from burning? We have outlined a number of factors that people should consider when applying for a Personal Loan, during their retirement phase.
Sit Back and Take a Fact Check on your Finances
Whether you’re retired, or on the verge of retirement, you need to check if there’s room for a loan in your budget. It is important to check if your pension and current saving would suffice for covering daily essential needs. In addition to this, you need to calculate how much of the leftover money will be spent on repaying an existing debt or mortgage (if any). This will have an idea of the approximate amount of money you’ll be left with, each month. Now all you need to do is check whether this money is enough to repay towards the unsecured personal loan you wish to borrow.
How much can you Borrow as a Personal Loan in the UK?
A lot of factors influence the amount of loan that you are planning to borrow. The amount of money you can pay each month directly affects your chances of getting a loan. For instance, Personal Loans generally tend to fall within a smaller bracket (generally up to £35K). Hence, you’re likely to get one even with a low income. However, for borrowing larger sums of money, you will need to check your affordability and prove it to your lender.
What Type of Unsecured Personal Loan should you opt for?
There a plethora of loans available in the market these days. However, the generalized choice for personal loans still remains between a ‘secured’ and an ‘unsecured’ loan. It is important to choose which loan suits your needs better. Again, checking your finances and evaluating your repayment ability is the key here. Secured loans often use your property as a mortgage, unlike unsecured loans. Even if you have the slightest doubt about repayment towards a secured loan, think it through. You may end up jeopardizing the roof over your head, in the years when you need it the most. Therefore, a crucial step towards happy borrowing is analyzing the type of loan, best suited to your needs.
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What Do Lenders See in my Application?
For any lender, the biggest concern would be recovering their money from the borrower. That’s why lenders scrutinize each loan application carefully, before handing in the big fat check. This credibility has a lot to do with how much income a person generates on a monthly basis. But what do lenders check when you’re retired, or about to settle into retirement? Following are some major factors that lenders take into account while dealing with applications in such cases:
The money coming into your account each month is one of the major determining factors for private lenders as well as banks. An affordability check before applying for a loan, is, therefore, an essential step 1. Lower-income will affect your chances at a bigger loan. Your income (pension) and savings should be enough to repay towards the borrowed amount. However, you also need to make sure that you don’t entirely run out of money.
Your credit history plays a significant role in the likeliness of you getting your desired loan. A lender is more likely to risk their money if you have a solid track record of timely payments. This check is imperative irrespective of your employment status. In the case of banks, retired people are more likely to have a long-standing savings account. They may even have credit card subscriptions with the same bank. This means the bank will have a record of your payment history as well as savings. Thus, your relationship with the bank will also impact your chances of getting a bank loan.
Assets are taken into consideration when you apply for a secured loan. If you are unable to pay towards this loan, the lender has the right to repossess the asset linked to the loan.
Lenders often set an age cap for borrowers. For instance, a lender could set a maximum age limit of 75 years, for the term’s end. Some lenders may set the maximum age for application as 75 years, giving you an edge. The average retirement age in the UK is 65 years with an average life expectancy of 79.2 years for men and 82.9 years for women. Depending on this some lenders may consider your age while setting up the length of the repayment period. For bank loans, younger people often have a higher chance of getting longer repayment periods. Therefore, make sure to check for age restrictions before applying for a loan.
Life goes on even when you stop working. Your retirement should not affect your decision of getting a loan. There’s nothing wrong with getting a little help for that car you’ve been dreaming of buying; or your home re-decoration plans after retirement. The extra cash will come in handy, without taking a toll on your savings. All you need to do is plan and ensure that you have enough resources to cover the repayment, before or after your retirement. After all, a little help doesn’t hurt if it lets you rejoice your retirement.