Even if you retire comfortably, living on a fixed income may not always leave room for emergency car repairs or that bucket list vacation.
If you’re in need of more cash than you can spare to cover a large expense, but don’t want to get bogged down with large credit card balances and high interest rates, a personal loan may be your solution.
Use Benzinga’s list of the best personal loans for retirees to connect with lenders and loan comparison services that meet your unique needs.
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Best Personal Loans for Retirees
With so many lenders old and new offering personal loans, you’re nearly guaranteed to find 1 that works for you. Most personal loans are general use, so they can cover an endless variety of financial needs from emergency expenses, debt consolidation or even something more fun, like that expensive new photography hobby you finally have time for.
A personal loan can even be used to generate more income in your retirement. Investments both before and during retirement make up a solid portion of retirement funding.
Maybe you’re eyeing a rental house as a solid stream passive income, but you’ll need some cash for repairs. A personal loan is a good choice to cover an expense like this if the expected return will outweigh the cost of the loan.
You can find more resources for planning and saving for retirement here.
Types of Personal Loans for Retirees
Most personal loans fit a fairly common mold. You can expect 1 lump sum payment. You’ll repay the loan in fixed monthly installments over a fixed period of time. Although you may be able to repay some loans early depending on its specific terms. Rates and terms vary with your needs and financial situation.
But there are ways that personal loans may differ. Your financial situation, credit history and type and amount of loan will determine what loan offers you receive.
A secured loan is backed by collateral. This could be in the form of an asset like your house or even your savings account balance.
Secured loans are often offered if you’re requesting a large loan or have something on your credit report that gives a lender pause. Only accept a secured loan if you are sure that you can repay the loan while meeting all the set terms. Defaulting could mean losing whatever collateral is backing the loan.
Unlike a secured loan, unsecured loans are only backed by your creditworthiness. While this means you aren’t at risk for losing important collateral like your house, your integrity as a trustworthy credit user is at stake. These types of loans are typically preferred to secured loans, especially if the amount you need to borrow is relatively low.
If you treat these loans as seriously as you would a secured loan, you’ll be in good shape.
Fixed-Rate vs Variable-Rate Loans
Fixed and variable refer to the interest rate applied to a personal loan. Fixed rate loans are especially beneficial to those living on a fixed income as you can budget to the penny how much a loan will cost you to borrow.
Because a loan must be profitable for a lender, a fixed rate may be higher or mean higher monthly payments. These slight downsides are usually outweighed by saving money in the long run.
There may be some instances in which a variable rate personal loan is preferred. If you’d rather pay lower monthly payments now so you can conserve cash even if it means paying more overall, this is a solid option. Maybe you need to lend your adult child some money and know they’ll be able to pay you back. If you rely in part on investments for income, you may get a higher return by investing your regular income than you’re paying in interest on the loan.
Personal Loan Requirements and Criteria
Although you’ll want to firm up on details with your lender, you can generally expect personal loan approval to rely on the following:
- Your FICO credit score
- Debt-to-income ratio
- Delinquencies or negative remarks on your credit report
- Credit utilization (your credit balance vs. your credit limit)
- Open accounts with a positive standing (payments being made on time and the like)
Some lenders may offer special loan considerations for retirees or people over a certain age. And BadCreditLoans.com will connect you with lenders willing to work with imperfect credit. You can even use its loans to start rebuilding your credit by taking out small amounts and repaying them within the given terms.
If you think you’re on solid ground credit-wise, utilize a free loan comparison service like Credible to easily compare lenders you qualify with. You can compare rates and terms from multiple lenders without visiting a million different websites.
Personal Loan Considerations
If you’re living on a fixed income or don’t want to dip into your savings for an emergency expense or large purchase, a personal loan is a solid option. Be sure you can meet any and all loan terms before agreeing. If you can’t repay, you could face collateral seizure or see your creditworthiness take a hit.
Try to look for loans with the best rates and flexible terms. Personal loans with minimal fees and penalties are also ideal. You won’t spend more than you planned on the loan this way.
Be sure to watch out for unethical lenders looking to prey on retirees. Thoroughly research lenders, especially online or payday lenders.
Or use a loan comparison service like Even. It only works with trustworthy lenders, so you can safely navigate the borrowing process without worrying about being taken advantage of.
Personal Loans vs. Credit Cards
While personal loans and credit cards are similar in function. Both amplify your purchasing power, but each is more useful in different instances.
Large or unexpected expenses may be best covered by personal loans. Personal loans often offer a higher credit limit and lower interest rates than credit cards, making them better for larger purchases.
Personal loans are also usually more ideal for debt consolidation. The personal loans from Payoff serve this exact purpose. You can roll multiple debtor payments into 1 streamlined payment, preferably under a low, fixed interest rate.
This personal loan use can also be a great way to polish up your credit report — lowering your credit utilization while raising your overall credit limit can often mean a score increase. And having multiple types of credit on your report looks good to potential lenders.
Personal loans aren’t revolving. Your payments only go towards paying down what you owe. With open credit cards, each payment both lowers your balance and increases your available credit. Because you can reuse the line of credit, a credit card is great for small or recurring purchases that you can budget to repay monthly.
Credit cards can also help your credit if you keep the balances low and meet the minimum monthly payment. But, they often have higher interest rates, so be careful not to let your balances get too high and pay them down as low as possible every month so using credit doesn’t cost you more than it’s worth.
Increase Your Spending Power Now
Just because you’re retired doesn’t mean your money needs to stop working for you. A personal loan can be a great way to supercharge your current spending power while budgeting for it over a longer period of time.
This is great for debt consolidation or improving your home to increase its sale price before you finally move to that warmer climate you’ve always dreamed about. You didn’t work hard all your life to restrict yourself in retirement.
Get in touch with 1 of the lenders or loan comparison services on Benzinga’s list to get cash in your account ASAP.