How To Get A Loan When You’re Retired

How To Get A Loan When You’re Retired

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated September 13, 2022

Over 30% of Canadians don’t have adequate retirement savings and carry debt with them into retirement. In addition, Canada’s major financial institutions have demanding lending rules, leaving retired homeowners with financial concerns if they need to borrow. Mortgages and lines of credit are harder to qualify for because of the banks’ lending requirements, making it feel like retired borrowers have to jump through hoops. 

Can You Get A Loan After Retiring?

Yes, you can secure a loan even after you’ve retired from your job. Lenders may qualify you for a loan if they can confirm you can afford your loan payments. Even if you don’t have income from a traditional employment source, lenders may still approve you if you have other sources of funding.

You may qualify for a loan after retiring in any of the following situations:

If You Have Equity In Your Home

Through home equity, all the challenges of getting mortgages, loans, and lines of credit are cleared. Whether or not you have some savings, your home equity makes you richer than you realize. You can easily capitalize on a loan through your house’s equity without the high standards or high-interest rates.

If You Have Income From Investments

You may have set up some types of investments that pay out dividends or other forms of income. For instance, dividend-paying stocks or rent collected from investment properties can be considered forms of income by lenders. 

If You Get CPP Or OAS 

If you receive Canada Pension Plan (CPP) or Old Age Security (OAS), these sources of income may be enough to get you approved for a loan. Just find out exactly what the lender’s eligibility criteria are before you apply, as not all lenders consider CPP or OAS as income. 

If You Work Part-Time

Some retirees take on casual employment after retiring from their long-term careers, often as a way to top up their retirement income or simply as a way to pass the time. Part-time employment is considered income to lenders, so you can use that income when you apply for a loan. 

Retiree Financing Options

While banks have high standards, they are not the only place you can get a loan. Private lenders have options available to you, and there are different types of lenders as well. Below are some financing options for retirees. 

Home Equity Lines Of Credit (HELOCs)

If you own real estate and have built equity in it — which is the difference between the value of your home and what you still owe on your mortgage — you may be able to use that equity to secure a loan

With a home equity line of credit (HELOC), you can borrow up to a certain amount, which will be considered your credit limit. You can borrow as much or as little as you want, as long as it’s within that limit. 

You can repay what you withdrew at any time, and borrow again and again whenever the need for money arises. Moreover, your home serves as collateral, which reduces the risk for the lender and often means lower interest rates compared to other loan types.

Pros Of HELOCs

  • HELOCs have low-interest rates, usually 0.5% above prime.
  • You only pay interest on the amount borrowed.

Cons Of HELOCs

  • HELOC approvals are based on income, debt, and credit score, so many retired applicants may have trouble getting approved.
  • Your home can be seized if you fail to make your payments. 
Alpine Credits

Online Personal Loans

With a personal loan, you can use the funds to cover any expense with no restrictions. Loan amounts typically range from $1,000 to $50,000, though the minimums and maximums may differ from one lender to the next.

Personal loans have more reasonable interest rates than credit cards, and they have longer loan terms to offer, typically for five years. Online personal loan lenders also have more flexible lending standards, often your credit score won’t be a major component in the approval process. 

Pros Of Online Personal Loans

  • Some lenders will accept alternative forms of income such as your pension plan or income from investments. 
  • Online personal loan lenders have a quick approval process and typically provide funding within 24-48 hours after approval.

Cons Of Online Personal Loans

  • Interest rates can be high depending on your financial profile, some reach as high as 50%.
  • Some lenders will check your income and credit history. If you have high debt and low income, it may hurt your chances of approval.

How To Get a Loan As A Retired Person

To be eligible for a loan as a retiree, you’ll generally need to meet the following criteria:

  • Be a Canadian citizen or a permanent resident
  • Be the age of majority in your province or territory
  • Have a permanent address
  • Have an active bank account
  • Have a sufficient income
  • Have good credit (varies by lender)

Common Documents Required To Get A Loan As A Retired Person

You’ll need to supply the lender with certain documents to prove your identity and your financial health, including 

  • A government-issued photo ID such as a driver’s license or passport
  • Financial documents that can confirm your income such as your bank statements or tax returns. 
  • Direct deposit form for funding and repayment. 

How To Increase Your Odds of Getting A Loan After You Retire

To boost your chances of loan approval following retirement, consider the following tips:

Determine the eligibility criteria. Find out what the lender requires in order for you to get approved for a loan. Although most lenders have very similar requirements, they may vary somewhat. Before you apply for a loan, check to see what the lender’s criteria are regarding income, credit scores, and debt loads. 

Consider adding a cosigner. If you can’t get approved for a loan on your own because of sub-par credit or lack of income, consider applying with a cosigner.

Supply all required documents. Find out what documents the lender needs and make sure you can submit everything required, such as income, CPP, or OAS statements.

Costs To Consider When Getting A Loan After You’re Retired

There are several factors to consider before applying for a loan after retirement, including the following:

  • Interest rate. Your interest rate will determine how much you’ll pay overall for your loan. To get an accurate idea of what your loan will cost you, look at the annual percentage rate (APR), which includes the interest rate and all applicable fees.
  • Fees. Loan fees can include loan origination fees, late fees, and early prepayment penalty fees.
  • Loan term. The term refers to the amount of time you have to fully repay your loan. Longer loan terms give you more time to pay off your loan, which means your installment payments will be lower compared to shorter loan terms. However, longer terms usually mean more interest paid overall. 
  • Repayment flexibility. Some lenders let borrowers choose the frequency of payments or pay off the loan early without penalty. 

Other Loans For Retirees

If you’re looking for other loan options, you can also look into the following: 

Car Loans

If you’re buying a vehicle following retirement, you can take out a car loan to help finance the purchase. These loans are collateralized by your car, so they’re usually easier to secure and come with competitive interest rates. 

Debt Consolidation Loans

If you have multiple loans with high-interest rates, you may consider consolidating them into one lower-rate loan. A debt consolidation loan allows you to take out one loan to pay off all other debt. You’re then left with a single loan, often at a lower rate, which makes debt management easier and your overall debt more affordable. 

Cosigned Loans

If you can’t get approved for a loan on your own merit, you may use a cosigner to help increase the odds of loan approval. A cosigner is someone with good credit and strong financials that is added to the loan contract. In the event that you default on the loan, the cosigner will continue making loan payments on your behalf. 

Loans For Retirees FAQs

Can I get a loan from a bank as a retired senior?

Asking for a loan from the bank entails a credit history and income background check. Even if your pension plan is enough to pay off a loan, your history could dictate the results of your loan application. For major financial institutions, not having a decent record of debt management could have you denied.

Can I get a loan as a retiree with bad credit?

If you have bad credit, it may be difficult to get approved for a loan as a retiree, though it’s not impossible. Some lenders cater specifically to bad credit borrowers. However, these lenders typically charge higher interest rates to offset the added risk, so a bad credit loan can be more expensive.

Can I get a payday loan as a retired person?

Yes, payday loans are available to retirees. Many payday loan lenders accept non-traditional income, such as CPP and OAS. Keep in mind, however, that payday loans are extremely expensive, and if you’re not careful, you could risk getting yourself into a vicious cycle of debt. 

Will applying for a loan after I retire hurt my credit?

When you apply for a loan, the lender may conduct a “hard inquiry” of your credit report, which can pull your credit score down, though the effects are usually temporary. 

Bottom Line

Banks and private lenders are not easy to get financial help from. From high and risky interest rates to the possibility of not even getting approved, a retired borrower’s options seem limited. However, the best news is that with Alpine Credits, you can easily get a loan through your house’s equity without the high standards or high-interest rates.

Since 1969, Alpine Credits has been helping retirees and pensioners with financial support through their home equity. They believe that your working status should not affect your ability to get a loan. Retired or working full-time, low credit score or high credit score, none of them have a direct effect on your approval. 

At Alpine Credits, you can get up to 80% of the value of your home. If you are curious about home equity and want to learn more about what it means, contact us today, obligation free.

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Save With Loans Canada

Special Offers

You Could Win Up To $5,000

You Could Win Up To $5,000
Expires Soon

Borrow up to $50,000 from Fairstone and be automatically entered to win up to $5,000!*

View Offer
Earn 5% Cash Back With Neo

Earn 5% Cash Back With Neo
No annual fee!

Earn an average 5%¹ cash back at thousands of partners and at least 0.5%² cashback guaranteed.

View Offer
Build Credit With Refresh

Build Credit With Refresh
Popular

Build credit while spending money with the Refresh Financial VISA card.

View Offer
Build Credit For $10/Month

Build Credit For $10/Month
Popular

With KOHO’s prepaid card you can build a better credit score for just $10/month.

View Offer
Best Personal Loan Provider by Greedy Rates
Icon

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.

When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.

Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.

Your data is protected and your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.