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Personal Loans For Pensioners Research Team | Posted On Thursday, April 05,2018, 05:16 PM

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Personal Loans For Pensioners



There are times in life, when you badly need a personal loan. If you are well-employed and drawing a high salary, you can easily get a personal loan. Now, think about the pensioner. He too needs money in a financial emergency.  He would love to avail a personal loan to meet this emergency. The big question? Will banks give personal loans to pensioners?

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Personal Loans For Pensioners

When it comes to a personal loan, banks/NBFCs are very strict with the eligibility criteria.  Many banks do not prefer lending to citizens, who are over 60 years of age. But, pensioners and senior citizens too need money in a financial emergency. So, banks and NBFCs offer specialized personal loans for pensioners in India.

1. Pensioners get personal loans

Banks offer personal loans to retired Central and State Government employees. Defence pensioners can also avail the personal loan. This money can be used to meet a family obligation or a financial emergency.

Banks may charge a nominal processing fee of around 0.5% of the loan amount. Defence pensioners are exempted from paying the processing fees.

Retired Central/State Government employees can easily get a personal loan from the bank, where they draw the pension. You (pensioner), can easily repay the personal loan, over a tenure ranging from 2 to 5 years.

SEE ALSO: Financial Plans For Retirement Benefits

2. Eligibility criteria of personal loan for pensioners

  • Many banks specify that your age must not exceed 75-76 years.
  • If you draw your pension from the bank, you can easily avail the personal loan. Many banks demand that there should be no returned cheques, because of insufficient funds.
  • The minimum loan amount is around Rs 25,000, while the maximum amount can be 18 times the monthly pension, subject to a ceiling depending on the bank. Defence pensioners may enjoy a maximum amount, which can be 20 times the monthly pension.
  • Your spouse/children can be the guarantor of this loan. Some banks may accept a third-party guarantee.

See Also: National Pension System

What about collateral on personal loan for pensioners? The personal loan for pensioners is secured against the pension, which is a permanent source of income and banks can easily recover the loan dues. Your (pensioners) spouse is also eligible for the pension, and is called a family pensioner. Banks can easily recover the loan dues from the family pensioner.

3. What about the interest rate on pensioners personal loan?

Some banks charge an interest of MCLR + (2 - 2.6%). Banks could charge a pensioner around 11-13% a year as interest on pensioners personal loan. There is a GST of 18% on banking services and products. Be Wise, Get Rich.

Pensioners loans are a type of personal loan offered to retirees to meet financial needs.

Objective and Purpose of Pensioner Loans:

The main objective of pensioner’s loan is to provide loans at a moderate interest rate to help pensioners fulfill a family obligation or emergency expenditures including medical expenses. These loans can be availed by retirees, from the bank which they receive a pension. Most of the banks providing pensioners loan do not charge a processing fee. The rate of interest on these loans varies from 11% to 13% a year.

Pension amount and the age of the applicant is a determining factor for loan approval. Many leading banks offer personal loan to senior citizens either by accepting a guarantee/ collateral or without collateral.

SEE ALSO: 5 Financial Planning Tips For Housewives To Secure Their Future

Benefits of Pensioner Loans:

A pensioner’s loan is designed to meet the credit needs of the pensioner and there are some benefits that are provided exclusively on these types of loans. Listed below are some of the benefits offered by banks on pensioner’s loan:

  • Quick processing of loans.
  • Minimum documentation.
  • Loans can be availed from the bank from which the pensioner is receiving the pension.
  • Normal or no processing fees on pensioner’s loan. Defence personnel are not required to pay a processing fee.
  • Easy repayment process. Repayment period differs across banks. Banks have categorized pensioners based on age. Pensioners above 75 years are allowed a maximum of 24 EMIs, whereas pensioners below 75 years are provided with a maximum of 5 years of repayment tenure.
  • The amount of loans given to pensioners varies and is at the discretion of banks. A pensioner below the age of 75 years can secure a maximum amount of Rs 5 Lakhs, whereas a pensioner above 75 years can secure a maximum amount of Rs 2 Lakh from any credit institution.
  • Applicants may opt for a secured loan or unsecured loan. For both types of loans, the repayment process starts one month after the loan balance is transferred in the pensioner’s account.

Pensioner Loans Rate of Interest:

Generally, the purpose of these loans is to provide the means to senior citizens, so that they are able to fulfill family obligations and emergency requirements. The rates of interest are devised keeping in mind the repayment capacity of the pensioners. The banks providing senior citizen personal loans generally charge 11% to13% per annum. Other charges like processing fee are not charged by most of the banks. However, GST is added to the sanctioned loans.

See Also: Five Personal Mistakes To Avoid

Documents Required to Apply for Pensioner Loans:

Many banks and financial institutions do not want to provide loans to pensioners, as they do not have any monthly income in the form of salary. However, if a pensioner wants to secure a loan, he has to provide some essential documents. After the verification of documents the processing of loan begins:

  • Proof of identity
  • Proof of residence
  • Proof of retirement
  • Passport size photograph
  • Last pension cheque

Repayment Period for Pensioner Loans:

The repayment period of pensioner’s loan depends on the age of the pensioner. Pensioners who belong to the age group of 56 years to 75 years are offered a maximum repayment period of 5 years. Pensioners above 75 years are provided with a maximum repayment period of 2 years. The repayment period is calculated based on the pension income of the applicant. The EMIs on these personal loans should not exceed the prescribed ceiling of 50% of the monthly income of the pensioner.

The repayment plan of the pensioners has been listed below on the basis of their age:

For Family Pensioners Including Central and State Government Employees:

  • Borrower’s up to 72 years of age are allowed a maximum loan repayment tenure of 60 months.
  • Borrowers belonging to the age group of 72 years to 75 years are allowed a repayment period of 48 months.
  • Borrowers belonging to the age group of 75 years to 76 years are provided with a maximum repayment period of 24 months.

For Defence Pensioners:

There are some special provisions for defence pensioners who receive early retirement from service. They are as follows:

Age at the Time of Loan Sanction

Repayment Period

Up to 56 years

84 months

More than 56 years and up to 72 years

60 months

More than 72 years and up to 74 years

48 months

More than 74 years and up to 76 years

24 months

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