When the age of retirement is reached or is approaching fast, the prospect of working less or stopping work altogether can make a lot of potential retirees wonder whether they will need a loan to help cover the cost of their mortgage, car, or even just their general, day-to-day expenses.
If you’re retired and living off your Canada Pension Plan (CPP), find out if you can qualify for a loan on CPP.
Many lenders will accept your Canada Pension Plan benefits as a source of income when you apply for a loan. However, those lenders generally won’t be banks or credit unions, since financial institutions tend to have tougher requirements.
Lenders that accept non-traditional forms of income include private loan providers and payday lenders. As long as your CPP payments are large enough to cover your loan balance, plus interest or fees, you should have a good chance at qualifying for a CPP loan.
| Loan Amount | Interest Rate | Term | Provinces Available | ||
 | Up to $35,000 | 2.99% to 46.96% | 4 - 60 months | Across Canada | Learn More |
 | Up to $1,500 | Varies by province* | Up to 62 days | BC, AB, ON | Learn More |
 | Up to $1,500 | Varies by province* | Max 62 days | BC, AB, MB, ON, NB, NS, PEI | Learn More |
 | Up to $20,000 | 19.99% - 46.8% | 12 - 60 months | BC, AB, ON, NB, NS, PEI, NL | Learn More |
 | Up to $1,500 | Varies by province* | Max 62 days | BC, AB, SK, MB, ON, NB, NS, PEI | Learn More |
 | Up to $35,000 | 9.99% - 46.96% | 6 - 60 months | BC, AB, SK, MB, ON, NB, NS, PEI, NL | Learn More |
Before you apply for a loan using your CPP, it’s important to know that some alternative lenders offer smaller loans with high-interest rates. If you’re comfortable with those conditions, you might be able to qualify with either of these credit sources:
It may be possible to get a personal loan using CPP but it depends on the lender. For instance, most banks won’t accept CPP retirement or CPP disability payments as income, since they’re not necessarily large or steady enough to pay back your loan. However, there are some alternative personal loan lenders that will offer CPP loans. Just remember, these lenders will charge higher rates.
A payday loan is a $100 – $1,500 loan with a short term and easy requirements. Borrowers can apply with payday lenders that accept alternative forms of income, like CPP benefits. You can get a CPP payday loan by direct deposit within 1 or 2 hours of approval depending on the lender.
Applying for a CPP loan isn’t too complicated. Just complete these steps:
Every lender has different standards for their clients, but in most cases, you must pass the following requirements to apply for a loan using your Canada Pension Plan:
Depending on your chosen lender and their qualification standards, there are a few different steps you can take that will help you secure a CPP loan.
While not all lenders will use your credit score as a factor during their qualification process, it’s always a good idea to improve it whenever possible. A high credit score will increase your chances of getting approved because it will show the lender you’re financially responsible.
Reducing your debt-to-income ratio by paying off existing debts is a good way to increase your odds of approval. The more income you have available after paying your current debts and bills, the more likely you’ll be able to qualify for a loan on CPP. The lender will want to ensure you have enough income left over to pay your CPP loan after paying your other financial obligations.
If your financial stability is not enough to win the approval of your lender, having someone with good credit and finances co-sign your loan can help with your odds of approval. A cosigner is someone who agrees to take over the loan in the event you are unable to. This greatly reduces the lenders’ risk, which can result in higher chances of approval, larger loans and lower interest rates.
Choosing a lender whose minimum requirements you meet will also improve your odds of approval for a CPP loan. One of the main factors you should consider is whether the lender accepts CPP as a source of income.
When applying for a loan on CPP, be sure to do your due diligence. There are many scam artists in town who pose as lenders, so make sure you learn about loan insurance scams during the process. What many of these scam artists will do is try to sell you “advance loan insurance,” claiming it’s a necessary expense for the risk that they’re taking by lending to you. On the other hand, some may try to use your financial and personal information to steal your identity. Before applying, it’s very important to verify your lender’s credibility.
The CPP is a benefit plan provided by the government for retirees. It provides Canadians of retirement age (at least 60 years old) to receive a monthly, taxable benefit. The amount you receive under this benefit depends on a few factors, including:
With the exception of Quebec, where the Quebec Pension Plan applies, anyone who is 18 or over, works in Canada and earns over $3,500 a year will need to contribute to the nationally administered Canada Pension Plan.
If the contributor has an employer, half of all necessary contributions will be taken out of their paychecks, while their employer pays the other half. However, if the contributor is self-employed, they will be responsible for paying the full amount of the required contributions themselves.
To get a loan using Canadian Pension Plan benefits, you need to apply for and receive your CPP payments. Retirees can apply for the CPP one month following their 60th birthday. Your CPP payment amount depends on how long you contributed to the CPP and how old you are when you apply to receive your payments. To increase their payment amounts, many retirees wait until they are 65 to start collecting.
There are many alternative lenders who see CPP payments as income, this is what they will use to qualify you for a loan.
Although CPP loans can be extremely helpful when you need access to fast cash, they involve certain risks that you must take into consideration. This is especially true if you’re considering a payday loan. Always consider all your options, understand the total cost of a loan, and choose a lender that you trust.
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Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.
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