Important for the credit for pensioners
- Offer collateral
Seniors should offer banks additional collateral to increase their chances of getting a loan: life insurance or securities.
- Include guarantors
It makes sense to specify your own children as co-applicants, so that the loan conditions are as favorable as possible.
- Pay attention to age limit
Even before the loan request, the upper age limit should be considered.
Many people over the age of 70 regularly struggle to get even a small loan. Due to the increased mortality risk, numerous loan requests are rejected from the outset. Here, a first credit comparison is recommended. Furthermore, we explain what retirees have to pay attention to a loan application.
How to find the right loan for retirees
Whether a holiday trip with the partner, a trip of several weeks with a motorhome or just a new TV – a variety of reasons ensure that seniors want to take a installment loan. But due to the old age, the disbursement of a loan is denied by a number of banks.
Many banks even have an age limit of 70 to 75 years, from which they no longer grant loans. Because the risk of no longer receiving the repayments is too big for them. Gradually, however, more and more banks are deciding to grant loans to seniors as well.
What is crucial for the Bank’s lending?
Unfortunately, conditions for borrowers of retirement age are usually worse than for other borrowers. For example, a number of banks require significantly higher interest rates or a much shorter term. Numerous banks are also pushing for the conclusion of a residual debt insurance.
The Private credit score
To grant a loan, especially the Private credit score is crucial for the bank. If the Private credit information is impeccable, there is a higher likelihood that the loan application will be granted. The higher the Private credit score, the better the credit rating and the higher the chance of a loan.
The pension is also an important factor in lending. It is important that you as a borrower receive a regular pension for which the desired loan amount is also appropriate. It is often assumed that the seniors should have at least € 1,000 available each month.
What other collateral increase the credit opportunities?
In order for the senior loan to be granted by the financial institution, further collateral should be offered to the bank. In particular, the following factors are worthwhile collateral:
A co-applicant is worthwhile in any case, because it has to pay for the credit debt, if you can not do it anymore. Senior citizens usually choose their own children as co-applicants. Essential here is a correspondingly good credit rating.
Life insurance as loan security
A life insurance can also be given as loan collateral. A term life insurance, for example, comes into force if the insured dies. In this case, the insurance company pays the agreed sum insured, which in the best case repays the entire balance of the loan. Capital life insurance can also serve as collateral.
Balance with residual debt insurance
Many banks are pushing for senior citizens to take out residual debt insurance. This will accrue for the remainder of the loan if you are unable to repay the loan. However, the premiums increase the older the insured are. It is important to consider whether life insurance is not an alternative.
Mortgage or mortgage
The granting of land charges can also help increase the likelihood of lending. These mortgages are usually understood as the inclusion of a mortgage or a mortgage on the home. However, your own property or the property may not already be preloaded.
Securities and other assets
In some cases, you can also offer insurance collateral to obtain the loan. This is possible, for example, with a car loan: You can use your new car, but it will remain in the possession of the bank until you have completely repaid your loan. Securities, savings and certain equity funds can also be given as collateral – but usually only to a certain percentage.
Children as co-applicants
For retirees to receive a loan, it makes sense to include a co-applicant in order to reduce the risk to the credit institution. Frequently secure their own children from their parents. This is useful for the following reasons:
- Due to the succession, the children usually have to pay for their parents’ debts anyway
- Because of their much younger age, the children are a safeguard that the loan can continue to be paid in the event of the death of the applicant
- As a rule, the children have a regular income, which is usually higher than the applicant’s pension
If it is possible for the children, they are ideal co-applicants. It is necessary, however, that they have a corresponding credit rating in order to sign the loan agreement. So he must have a regular income and must have no negative Private credit entries.
What danger do the children expose themselves to?
Before signing the loan agreement as a co-applicant, the children should be aware of the danger that this creates for them. Because they are liable with their entire assets if the borrower can no longer pay his loan debt. As soon as this happens, the co-applicant is obliged to accept the borrower’s payment obligations. For this reason, the children should first consider carefully whether they want to expose themselves to this risk.
Are the loan conditions improved by the co-applicant?
For the elderly, it has positive effects if the own child agrees to sign the credit agreement as a co-applicant. Because in this way, the loan conditions are usually improved. This increases both the likelihood that the applicant will even get the loan granted, as well as that the interest will be cheaper and the duration may be longer.
Guarantor as an alternative
It is also often possible for the bank to grant a guarantor instead of a co-applicant. This does not necessarily have to be responsible for the whole amount of the loan, but can ultimately also balance parts of the loan amount – but this must be stipulated in the contract for a loan with a guarantor.
Property as security
In addition to a co-applicant, one’s own property can also be used as collateral for the loan – provided that it belongs to at least 50% of the borrower and is not encumbered.
Why are real collateral useful?
Collateral securities are collateral that has a tangible asset. Also the mortgage and the mortgage belong to it, because its material value is the mortgage object – thus the home of the borrower.
It makes sense to offer the collateral security: the collateral value of the latter remains stable during the term of the loan and the value of the collateral can be easily determined. The banks can therefore compare the value of their loan with a comparatively real value.
Mortgage and mortgage as collateral security
Especially in real estate financing, the mortgage and the mortgage are popular collateral to hedge the loan. The following aspects should be considered:
- The borrower owns the property.
- The mortgage or mortgage gives the bank a lien.
- If the borrower can no longer pay, the financial institution has the right to seize the property. You can forcibly auction the mortgaged property in this case.
What are the benefits of real collateral?
Take a relatively small loan, the mortgage or the mortgage by no means worthwhile. Only when larger installment loans or real estate loans, the property should be offered as real security. This results in the following benefits for the elderly:
- Real collateral is popular with banks
- The interest costs are thereby considerably reduced
- The total cost of the loan will be lower
Mortgage vs. mortgage
While the mortgage becomes smaller with each payment until the loan is finally repaid, the mortgage remains – until the beneficiary deletes it.
How is the age limit designed?
There is no universal or statutory age limit. For this reason, the age hurdles individually set by the banks can vary greatly.
Why is there a maximum age limit?
For banks, there is always the risk that borrowers can no longer pay their loan debt. Due to the advanced age, this concern with senior citizens’ loans comes even more into focus as the financial institutions are worried that the retiree will fall ill or die during the loan term.
In such cases, banks will remain on unpaid loans without being able to offset the loss – which is why many financial institutions have introduced an age limit.
What is the average age limit?
For most banks, the age limit is 75 years. However, some banks have also set a maximum age limit of 70 or 80 years – seniors should therefore inform in advance at the respective financial institutions. Often, however, people over the age of 65 have problems getting a loan.
These age limits can make lending fail because many banks do not want to risk it. Others require additional collateral to reduce the risk of their borrower’s insolvency. However, collateral such as a co-applicant or life insurance can not guarantee lending. For some banks, old age is a fundamental reason for refusal.
Step by step to the pensioner loan
Before you make a loan for retirees, you should compare the terms of the various providers. This is best possible with a corresponding loan calculator on the Internet. For these, proceed as follows:
- Enter the desired loan amount.
- Enter the desired repayment term, the desired debit interest and possibly the intended use.
- Let us see which providers are even suitable for your preferred loan.
Effective interest rate instead of debit interest
When making credit comparisons, pay less attention to the borrowing rate and more to the effective interest rate. This not only indicates the pure interest cost of the loan amount, but also includes all loan processing fees. So it shows the actual costs associated with borrowing.
It is also important to keep in mind the monthly repayment installment, which is particularly important for seniors when making a decision: As a rule, the monthly pension is significantly lower than a conventional, fixed income. Therefore, pensioners should not overstate the monthly payments and leave room for unexpected costs, such as those relating to their own health or to their own home.
How to apply for your retiree loan
In most cases, you can apply for your retiree loan online; However, you also have the option of applying at a branch at any time. It is important to remember that all the information you provide is true – otherwise you may be denied the loan. You may even have to be afraid of being charged with fraud.
Once you have chosen a provider, you should download, fill in and sign the loan application from the internet. You also need the following documents to apply for the Seniorenkredits:
- Several pension notices and proof of income
- Bank statements of the past three to six months
- For co-applicants: evidence of their income
You also need to do a legitimacy check on online degrees so the bank can identify you. There are two different ways to do this:
- Online identification
An ID card is held in front of the camera and the serial number is given. Using this data, the responsible employee can identify you.
- Posident method
Here you go together with your documents and identity documents in a post office, in which a post office employee carries out an identification check.
Finally, your credit rating is checked using a Private credit query. If this is also successful, you will normally receive a written notification and, a few days later, the loan amount will be paid out to the account specified by you.
questions and answers
How is a pensioner loan different to a normal loan?
Usually there are no special loans for retirees. Nevertheless, seniors often have to expect worse loan conditions. So often the term is limited and the interest increased. Also, many credit institutions set a life to which the loan is payable again.
What pension do seniors need to receive to get a loan for retirees?
Senior citizens are expected to receive around € 1,000 in income at their leisure. If your monthly income is lower then a loan is usually not granted. However, the minimum amount of the pension depends on the bank in which the loan is requested.
What do I have to offer the bank to get a retiree loan?
In order for you to receive your pensioner loan, you must offer the bank appropriate collateral. You can, for example, specify a co-applicant. Also, in some cases, taking a mortgage or mortgage may be advisable to increase the chances of the loan. It is important that the risk that the bank does not get the loan repaid back is kept as low as possible.
If I exceed the age limit, do I have no chance of getting a loan?
That is completely dependent on the bank. However, a number of banks still lend if the borrower can offer various collateral. As this reduces the risk that the loan amount can not be repaid, said financial institutions lend their loans. However, others generally refuse to lend if the upper age limit is exceeded.
Does a residual debt insurance for a retiree loan makes special sense?
Whether a residual debt insurance makes sense depends on the individual case. Here seniors have to weigh the pros and cons: On the one hand, the conclusion of this insurance is comparatively expensive. On the other hand, in the event of death relatives can be protected from having to settle the remainder of the loan. The completion of the residual debt insurance is worthwhile if your loan is a longer-term loan, for example, a real estate loan. However, if you can use other collateral for your loan, you should consider whether it is not a sensible alternative.