There are numerous scenarios on why a pensioner may need to take out a loan and finding an appropriate loan can be difficult. Seniors on a low income often have trouble qualifying for small loans as many lenders classify them as a higher risk borrower based on limited cash flow.
The lack of borrowing opportunities really frustrates many pensioners and can be a big source of stress.
Luckily, there are great organisations throughout Australia that provide loans for pensioners, assisting them in their time of need.
A few things to know before applying for loans:
– If you have bad credit, call and speak to the lender first. You don’t want to waste your time applying just get knocked back.
– Applying to numerous lenders in a short period can have a negative impact on your credit score (try to minimise your applications and this can be done by calling ahead first)
– Try applying to one lender first, if you do not qualify – find out why. Only apply to other lenders once you know why so that you can disclose this prior to applying with them.
– Always make sure you completely understand the terms and fees involved with a loan.
– Always check on the credibility of the lender – search for reviews and complaints on any potential lender. Also check if they are licensed.
*If you are under serious financial stress, a loan may not be your best option. In fact, it can possibly make things worse. Try speaking to a free financial counsellor first as they may be able to really help you with your finances. This can include speaking to your creditors to work out new repayment terms on your behalf.
Below are a few popular loan options for pensioners based on scenarios.
Help paying bills – There are numerous options for bill assistance depending on the type of bills you have.
– Utility bills: As a pensioner, you may not need a loan, as there are multiple utility rebates and vouchers you can apply to. The Salvation Army provides utility bill payment services Australia wide. Most electric and telephone providers have discount programs. In addition, the government provides utility and telephone allowances along with help for essential medical equipment. If you are not already taking advantage of these programs, contact the Department of Human Services today.
– Non-utility bills: There are a few different options for bill assistance with personal loans or credit cards. 1. Contact the lender and ask for an extension on the repayment. 2. If you are on Centrelink, ask for an Advance Payment of your normal payment. 3. Take out a small loan with a non-for-profit such as the GoodShepard (see more below).
Immediate cash – When dealing with unexpected circumstances that require cash, there are few genuine options available, as most general loans require a bit of time. The quickest option is that of payday type loans – also known as quick loans, micro loans, small loans, online loans, etc. They are quick but come with a high cost of borrowing and can become ridiculously expensive should you have issues with repayments.
Other affordable options include Centrelink Advance Payments, non-profit loans and bank loans. These loans may require more time to access, but will be much cheaper.
In certain situations, you may want to consider Hardship. If you have had a big change in your financial situation such as illness, unemployment, divorce, etc this may be a option. A hardship variation is essentially a restructuring of your loan terms, which works with your circumstances.
Household needs loan – There are two very popular loans to assist with essential household goods, items such as appliances, computers, furniture etc.
NILS is the no interest loans scheme which are for amounts between $300 and $1200 with a repayment period of 12 – 18 months. As the name implies, there is no interest or fees attached to these loans.
StepUp is a slightly different loan with a higher borrowing limit of $800 – $3000. The repayment period is 6 months to 3 years and while there are no fees attached to the loan there is a small fixed interest rate of 5.99%.
Medical assistance loan – Both the NILS and StepUp loans are adequate for different medical item needs. NILS is ideal for items such as wheelchairs and asthma pumps or other equipment under $1200. StepUP is ideal for certain medical and dental treatments that require more than $1200. Speak to a Good Shepard representative to see how they may be able to assist (Good Shepard provides the NILS & StepUp loans)
Pensioner car loan – Over the last few years the rise of irresponsible car loan providers has increased, with many compared to payday loan type lenders. It is important to understand the terms presented and be wary of high-pressure sales tactics. For small car loans up to $3000 consider StepUp loans, for higher amounts, consider peer to peer lending or normal loans from a bank or credit union.
Pensioner home loan – There are limited options for low-income seniors to obtain a home loan. The main obstacles are age and income. A reverse mortgage is an option to access cash for retirement but only works if you already own a home, which has equity in it. Home loans for purchase are a bit trickier and are dependent on so many factors. One of the easiest ways to understand your options is to speak to a mortgage broker that specialises in loans for seniors or look for a specialist home loan lender.
Whilst finding genuine loans for pensioners can be challenging, there are options available. In addition to the above options, different communities throughout Australia have local and national non-profits which can also assist in the above as well as other serious situations such as food. Speaking with your local free financial counsellor is a good way to find out what options are available within your community.