While there’s no standard definition of a loan for seniors, retirees, pensioners or those living on Social Security, people at this stage of life may need a personal loan for emergency expenses, medical bills, special equipment and more.
Some lenders consider you for a personal loan even if you’re no longer employed — and federal law prohibits lenders from discriminating based on age (or gender, race, religion or other demographics). But it’s important to be aware of the costs some loans carry and the impact borrowing at a later stage in life could have on your retirement funds.
8 types of loans for senior citizens
Even if you no longer have employment income, you may still qualify for a number of loans, provided you have Social Security benefits, a pension or retirement fund or another form of income.
Here are eight types of loans available to retired people:
Personal loans
Banks, credit unions and online lenders offer personal loans ranging from $1,000 to $100,000 with rates from 5.99% to 35.99%. Personal loans can be secured or unsecured, but most personal loans are not backed by collateral. Instead, you need to show regular income to prove you can repay the loan. You’ll typically also need a credit score of 670 or higher, although some lenders consider lower scores.
What is the Finder Score?
The Finder Score crunches 6+ types of personal loans across 50+ lenders. It takes into account the product’s interest rate, fees and features, as well as the type of loan eg investor, variable, fixed rate – this gives you a simple score out of 10.
Read the full Finder Score breakdown
Personal lines of credit
A line of credit falls somewhere between a personal loan and a credit card. Like a loan, you can access cash instead of credit, making it ideal for home renovations and other projects. And, like a credit card, you get access to a credit limit that you can withdraw from as needed and it replenishes as you pay it back.
This structure can be useful when you have ongoing and unpredictable expenses. Since personal credit lines tend to have lower rates than credit cards, it can also be a more economical way to finance home improvements for seniors or pay for other large expenses you can’t pay up front.
Reverse mortgages
Reverse mortgages offer a line of credit, a regular income stream or a lump sum payment by borrowing against your home’s equity. Instead of making monthly mortgage payments, a reverse mortgage pays you.
However, this reduces your home’s equity and comes with risks. For example, interest and fees are added to the loan balance each month, so the loan balance increases over time. And you’re still responsible for paying your property taxes, homeowners insurance and maintaining the home in good condition. The loan is repaid when the owner sells the house, moves out (such as to a retirement community) or upon death.
Home equity loans
A home equity loan lets you borrow against your home’s equity to access funds you can use for any purpose. Home equity loans usually offer lower rates than personal loans, since they’re backed by collateral and are less risky for the lender. But you’ll typically need at least 20% equity in the home, and you could lose your house if you can’t pay it back.
Home equity lines of credit
A home equity line of credit (HELOC) also uses your home’s equity as collateral for a loan. But instead of a lump sum payment, you get access to a revolving credit line that you can draw on as needed. During the draw period — which usually lasts 10 years — you’re only required to make interest payments. After the draw period is up, you’ll make principal and interest payments.
Cash advance apps
Also known as pay advance apps, cash advance apps offer advances on retirement income with no interest, usually up to $250 to $500 per deposit.
They’re a low-cost alternative to payday and installment loans, though you may need to sign up for a monthly membership, which can cost as much as $10 or more per month. However, there are apps with no monthly fees. There’s also typically a fee to receive funding the same day — otherwise, it may take up to three days for free transfers.
These apps are relatively new, and some users may find them difficult to navigate. But it may be worth it if you find yourself regularly short of cash due to a misalignment between your income and bill frequency. If you’ve had trouble using apps before, look for one with a customer support number that you can call to walk you through the process.
Bridge loans for seniors
Bridge loans are a type of short-term financing designed to cover — or bridge — brief gaps in funding. They’re often used in real estate transactions when buying a house before selling your previous residence or if you’re moving to an assisted living facility.
Elderlife Financial Services is one lender that provides bridge loans between $5,000 and $500,000, which you pay back over a few months to a year. Some bridge loans don’t require repayments for several months after loan funding, which can give you a little breathing room when you’re in transition.
Payday alternative loans (PALs)
Some federal credit unions offer two types of small-dollar loans as an alternative to high-cost payday and installment loans. The National Credit Union Administrate sets limits on how much a lender can charge on these loans:
- PALs I are available from $200 to $1,000 with terms from one to six months and rates capped at 28%. You must be a credit union member for at least one month to qualify.
- PALs II are available in amounts of up to $2,000 with terms from one to 12 months and rates capped at 28%. You can get a PALs II as soon as you join a credit union that offers them.
The main drawback to PALs is that they aren’t as widely available as other financing options.
Financing options for veterans and people on disability
Whether you are retired from the military or living on disability, you may have additional loan options. Some lenders, like Navy Federal Credit Union and USAA, cater to veterans.
Other lenders may have special deals or lower interest rates if you provide proof of your service. You could benefit from a personal loan for veterans, and in many cases, spouses are also eligible.
If you’re on disability (SSI/SSDI), you may want to start by comparing lending options for people on disability that may be easier to qualify for.
Loans for seniors with bad credit
If you have poor credit — say a score under 580 — some lenders offer loans to seniors with bad credit. For example, Avant, Upgrade and Upstart may consider your application if your score is below 580. However, you have to show that you have some form of regular income, which includes loans for retirees with a pension as well as those on Social Security.
You’ll pay a higher interest rate if your score is less than optimal, and expect most lenders to tack on origination fees to your loan. Origination fees can run anywhere from 1% to 10% of the total loan amount, although some lenders don’t charge origination fees.
Loans for people on Social Security
While there aren’t specifically loans for seniors on Social Security, the money you get from Social Security is considered a form of income. And, your ability to repay a loan is one of the key factors lenders consider when determining loan approval. Lenders also look at your credit score and debt-to-income (DTI) ratio to decide if you qualify.
However, if your credit score isn’t great or you already carry a fair amount of debt, some loans may be out of reach. Still, there are other loan opportunities for seniors on Social Security, such as payday or installment loans — which can be pricey and risky — or cash advance apps that accept Social Security income. Since cash advance apps don’t check your credit or care about your DTI ratio, they are a valid small loan option for people on Social Security.
Protections against lending discrimination for retirees
The Equal Credit Opportunity Act makes it illegal for lenders to consider your age or the type of income you receive when you apply for a loan. However, your age and retirement status may still affect your ability to get a loan. Here’s how:
- Credit scoring systems may consider your age as a factor. But in most cases, this works in favor of applicants over 62. A higher credit score may make it easier to meet lender requirements, get lower rates and fees, and access higher loan amounts.
Lenders may consider the availability of your retirement benefits or other income when deciding whether to offer you a loan. If you receive income that’s set to expire before the loan term is up — such as unemployment benefits — lenders can legally deny your application.
Types of retirement income lenders consider
Lenders may consider a range of income sources when you apply. As long as you have a steady source of income — whether through assets, a part-time job, disability or a pension — you may qualify for a loan.
Here are income sources many lenders consider:
- Retirement income. Money you receive from Social Security, IRAs, pensions, annuities, 401(k) or other retirement plans is generally considered valid income for the purposes of loan approval.
- Investment income. This income would include any money you bring in from investments, such as dividends. You may also be able to include rental income if you own investment properties.
- Regular employment. If you have a job in addition to Social Security, that’s one of the easiest ways to prove extra income, even if it’s only part-time.
- Self-employment income. If you’re a freelancer or a gig worker, lenders typically accept those funds as part of your income.
- Bonuses. If you get bonuses or commissions as part of your wage compensation, some lenders may consider that as part of your total income.
- Alimony or child support. Alimony or child support payments may count toward your income.
- Public assistance. In addition to Social Security, lenders may consider benefits like Supplemental Security Income (SSI), disability or unemployment compensation, for example.
Also, the majority of lenders require you to be a US citizen or permanent resident to be eligible for a loan, but some lenders may consider nonresident seniors for loans.
How to apply for a loan as a senior
Follow these steps when applying for a loan.
- Check your credit score. Knowing your credit score can help you decide where to look for a loan. If your credit is great, you’ll have a wide variety of options, but if you have a lower score, you’ll need to narrow your search.
- Evaluate your budget. Figure out how much you need to borrow and how much you can afford to pay back each month. Be careful not to borrow more than you need or can afford to pay back.
- Compare lenders. Be sure to compare multiple lenders to find the best deal. Consider rates, fees and loan terms to find one that fits your needs.
- Get prequalified. Prequalifying can give you an idea of the rates and terms you may qualify for before you go through a formal application process and hard credit check.
- Prepare your documents. Find out what lenders require so you have the necessary documents on hand.
- Apply. You may be able to apply online, in person or over the phone — whichever makes you the most comfortable. If you’re unfamiliar with the process, talking it through with a loan representative may be helpful.
- Review and sign your documents. Be sure to read over your loan agreement before signing, making sure you’re aware of the repayment plan, rate and fees, if any.
What you need to apply for a loan
While every lender is different, be prepared to provide the following information:
- Personal information. Your name, date of birth, Social Security number and contact details.
- Income information. All sources of income, including proof of direct deposits, retirement award letters, bank statements and W-2s or pay stubs, if applicable.
- Debts. You’ll also need to provide information about your current debts.
If the eligibility criteria aren’t clear, contact the lender before submitting your application. For example, if your investments have inconsistent income, you may not meet the minimum income criteria.
And to give yourself the best chance of being approved, make sure you have all your information on hand before applying.
Other sources of financial assistance for seniors
Multiple federal, state and local programs offer financial assistance to seniors and others with low to moderate income. Assistance may be available for food, housing, utilities, health care, in-home care and more. Here are some options:
To find out about these and other services you may qualify for, visit the BenefitsCheckUp website from the National Council on Aging. Enter your zip code to see what programs are available in your area.
Bottom line
Living on a fixed income doesn’t necessarily disqualify you from getting a loan. But your monthly repayments do impact your budget. When choosing a lender, look for the lowest rates and fees possible, and be open to other options — like benefits for seniors — if you need ongoing assistance for living expenses.
Frequently asked questions
Are there guaranteed loans for seniors on Social Security with bad credit?
No. Even payday loans — which are relatively easy to get — still require you to prove your income and identity. If a lender advertises guaranteed loan approval, consider that a red flag.
Are there special home loans for seniors?
A reverse mortgage is the only type of home-related loan available to primarily seniors, and it requires you to own your home.
However, there are loan programs — such as VA, FHA and USDA loans — meant for veterans, low-income families and those who live in rural areas that may also make sense for seniors or retirees on a tight budget. These types of loan programs typically have less stringent requirements to qualify than traditional mortgages and consider Social Security and other retirement funds as income.
What is the $5,000 loan from Social Security online?
There is no “$5,000 Social Security loan.” This is likely a marketing gimmick to get seniors, retirees or others on Social Security to take out a loan with — most likely — a high-risk lender with triple-digit interest rates. As always, do your research on a lender before applying.
