Living on a fixed income is not always easy. Unfortunately, retirees often encounter unexpected situations that they do not have enough money in their savings account to cover. It might be something simple like an appliance breaking, or it could be a medical emergency. While older people tend to have good credit scores, they also have a limited monthly income, which may worry lenders. If you need to apply for a personal loan, here are some tips to increase your chances of being approved.
Figure Out What You Can Afford
If you do not already have one, create a budget that shows your income and your expenses. For one thing, it will help you figure out how much of a loan payment you can afford. Secondly, it will also give you something to present to the lender that shows that you will be able to repay the loan. Even if you find out you can afford to borrow more money than you thought, only borrow as much as you need. Do not go any further into debt than you have to.
Try Alternative Lenders
Going into a traditional bank may not be your best option. Online loan referral websites allow you to fill out one application and then they match you up with potential lenders. You can easily evaluate the different offers to find the one that best suits your needs. Make sure that you get a fixed interest rate loan no matter which lender’s offer you accept. The last thing you want is for your loan payments to go up unexpectedly.
Check Your Credit Report
Because they often do have good credit, senior citizens present a very attractive target for identity thieves. Pull your credit reports from Trans Union, Experian and Equifax and make sure there are no accounts on there that do not belong to you. Sometimes accounts between family members, such as fathers and sons with the same name, can get mixed up as well. Examine all three reports and dispute any errors if you find them.
Secure Your Loan
Another way to help alleviate lenders’ concerns about your income is to use assets to secure your loan. Many people use their home as collateral. If you have a 401k plan or a ROTH IRA that you do not want to tap into, you may still be able to use that as collateral for your personal loan. Cars, watercraft, and even some investments are all things you may be able to use to secure your loan. Secured personal loans often come with better interest rates as well.
Getting a personal loan is difficult for most people, but it can be even more difficult to do after you are retired. However, do not let lenders intimidate you or try to talk you into loans that do not make good financial sense. If you have all your paperwork together and you carefully research your options, you will eventually be able to find a lender who will offer you a loan with reasonable terms.
Editor’s View: I agree that it is likely difficult to obtain such a loan for those who are retired, simply because income streams are usually not such to where a lender would consider you a good risk. If you are not too far along into retirement and finding yourself in this situation, you may well want to re-consider whether you’re truly ready for retirement. Obtaining loans will get increasingly difficult, and will have more ramifications on your overall retirement strategy the further into your retirement you get.
About the Author: Dona Collins is a personal finance specialist and writer with a passion for helping other succeed financially.