A Guide to Loans for Pensioners

No one can deny that pensions are a great support when dealing with everyday expenses. But, they’re hardly enough when an unexpected bill crops up.

So, if a situation like this occurs, will lenders approve loans for pensioners, or will they tell them to look for help elsewhere? Well, let’s find out the answer, shall we?

What this article covers:

Loans for Pensioners: Possible or Not? 

Typically, lenders didn’t like giving personal loans to pensioners because they believed these individuals would have a hard time paying back the money. As such, they’d either refuse their loan application or charge a higher interest rate. 

However, that’s hardly fair. Isn’t retirement the time you’re supposed to enjoy your life without worrying about money? 

And it’s not as if pensioners don’t have a source of income. Don’t they get regular payments from the government? 

loans for pensioners

Following that train of thought, many lenders have started giving out pensioner loans. These are personal loans catered to pensioners and their income, typically ranging from $500 to $5000. These loans require no security or guarantor. Simply proof that you receive a steady pension, and that’s it!

In short, if you’re an Australian who receives a pension, be it an age pension or a Centrelink loans disability pension, you’ll be eligible for a pensioner loan. 

Eligibility Criteria of Loans for Pensioners 

To receive a pensioner loan, you simply need to:

  • Be over 18 years of age
  • Be an Australian citizen or resident 
  • Be receiving a regular income, be it a Centrelink pension or otherwise

As long as you fulfil these requirements, you can apply for a pensioner loan. Within your application, you’ll include:

  • A copy of your ID
  • Your 90-day history of bank transactions 
  • Proof of income (wages or Centrelink payments slips)
  • A short online application form entailing your personal details and desired loan amount 

How Much Do Loans for Pensioners Cost?

This will depend on how much you’re borrowing. 

If you’re borrowing $2000 or less, this is considered a small-sized loan.

pensioner loans

All small-sized loans must follow the regulations set by the Australian Securities & Investments Commission (ASIC), which state that small loans can never be subjected to interest rates.

The most a lender can charge is a 20% establishment fee and a 4% monthly maintenance fee. 

So, for example, if you’ve borrowed $1000 to be repaid in a month, you’ll pay:

  • Establishment fee: $200
  • Monthly fee: $40
  • Total amount: $1240 

But what if you need to borrow more than $2000? 

Well, now your loan will come with an interest rate. Typically, most lenders have a fixed interest rate of 5.99% per annum and an establishment fee that can be anywhere from $100-$700 (such loans have an annual percentage rate of 48%).

Now, with loans like this, the longer it takes you to repay the loan, the more you’ll have to pay back due to the cumulative interest. So, be rational when choosing your loan terms to avoid putting yourself in the red. 

Note: Keep in mind that both small and large loans can have late fees, which are charged when you don’t make your payments on time. There may also be what’s known as default fees, which can be twice as much as the original loan. 

Are There Alternatives to Pensioner Loans?

If you don’t think a pensioner loan is a right move for you, here are a few other options you can explore. 

Pension Loans Scheme (PLS)

The Pension Loan Scheme allows Australians who’ve reached the age pension age to take out a non-taxable loan from the government. This loan can amount to 1.5 times the maximum fortnightly rate of the age pension, which is approximately $36,000 per annum for singles and $54,000 for couples.

loan for pensioners australia

However, not every pension can get this loan. You must own real estate in Australia because that property will be used as security against the loan.

Of course, the loan comes with interest and some additional costs. However, you don’t need to make your repayments at a specific time. So long as your security is safe and sound, you can pay back the loan at your leisure. 

However, once you decide to sell the property being used as security, you need to either pay back the loan in full or transfer the loan to another property. If you haven’t paid back the loan by the time of your death, the total loan amount and incurred interest will then be recovered from your property. 

No-Interest Loan Scheme (NILS)

Australia offers low-income individuals and families small loans through its No Interest Loans Scheme (NILS).

loans for pensioners in australia

With this scheme, low-income individuals can borrow up to $1500, provided the money will be used for essential purchases. This means you can only use this money to pay for things like:

  • Household items
  • Medical and dental services
  • Electrical goods
  • Educational items
  • Car repairs 

Now, the beauty of the NILS is that it doesn’t come with any fees or interest rates. You only pay back what you borrow and nothing more. Once you repay the loan, the money is made available to help someone else in your community. 

However, not everyone Australian can apply for a NILS loan. To qualify for the loan, you need to make an income below $45,000 per year after tax or, instead, have a Health Care Card or a Pensioner Concession Card.

Conclusion 

If you need loans for disabled persons or a senior loan, you can take out a pensioner loan right from your home. All you need to do is fill out an online application and provide a few documents.

The best thing about loans for pensioners is that they don’t require collateral, unlike the PLS. Moreover, you can use the loan money to pay for absolutely anything, which can’t be said for the NILS. So, if you don’t like your loan to come attached with terms, make sure to choose a pensioner loan.

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