What Are Pensioner Loans?

You’ve worked a lifetime; sent your kids through school. Now, you’re retired and the kids have their own jobs, families, and lives. The home has become an empty nest. You have the rest of your life ahead of you. Welcome to your sunset years! These are the years of your life where you look forward to waking up every morning and spending the rest of the day with your spouse. After all the years of grinding and sacrifice, you are officially stress and worry-free.

Or are you?

The sunset years are the twilight of your life. You should be enjoying them. However, life can throw you a few curveballs. As you age, you become more susceptible to health issues. If you retired without much savings and are living from one pension check to another, the twilight years might be the most difficult ones. If you get hospitalized, require special procedure, and need regular medicine, you may need to take out a pensioner loan.

pensioner considering loan

As a retiree, it will be hard to get approved for a loan. It will be hard to convince the lender that you can still make the monthly payments, especially if your income is not enough. Unless you have a big bank account, it will be difficult for the lender to green-light your loan application.

Are There Loan Options For Pensioners?

If you’re a pensioner who is thinking of taking out a loan to cover his needs, here are 2 options that you can consider.

Reverse Mortgage

loan agreement against pension

If you are low in cash but have valuable assets in your possession, the Reverse Mortgage could be the loan program for you. In this type of loan, if you own property, its equity is reversed or converted to cash. The lender will be paid back when you sell the property and move into a retirement home or when the remaining borrower passes on. Borrowers are not required to have income. Likewise, you are not scheduled to make payments for the loan. However, you will be charged interest plus fees for processing the loan.

Apply for a Personal Loan with Your Bank – If you have been maintaining a great relationship and have a sterling record with your current bank, try applying for a personal loan. The people in charge of lending will be familiar with your history with the bank and might be more understanding of your need for money.

You can also run to the government if you are having problems with your bank in getting your personal loan approved. The government has the following lending instruments at its disposal:

No Interest Loan Schemes (NILS)

You can avail of loans up to $1,200 that are free of interest. These loans are set aside for pensioners who need financial assistance to take care of their medical bills, car repair, and basic daily needs such as groceries. However, you must have a Government Centrelink pension card to qualify.

Pensioner Loan Scheme

If you are a pensioner who does not have income or assets, the Pensioner Loan Scheme will let you borrow money that is tied up with assets.

Advance Payment

This is a program whereby the government will advance up to 3 weeks of pensioner checks without interest charges. The advances can be paid back in 6 months.

applying for loan secured against pension

Are There Potential Traps When Applying For Pensioner Loans?

If you see those flashy ads that promise the sky and may appear like the answer to all of your problems, look away. These are called “Payday Loans” and they prey on your need for quick cash. Payday Loans make it seem your application will be easily approved and your problems will go away once you have the money. However, you might be in a worse situation if you fall into this trap:

• You may end up borrowing more than you need.
• Payday loans charge very high interest rates. At 48% per annum, you might be better off with a credit card loan.
• There are charges to avail of the loan such as a 20% upfront fee that is based on the amount of money you are borrowing.
• As a short-term loan, the repayment period may only be as short as 30 days.

Given the exorbitant interest rate and the short repayment period, availing of a Payday Loan may put you in a debt trap where there is no escape.


Instead of getting a pensioner loan, why not stay active and continue to earn money? The government is encouraging pensioners to apply for the Work Bonus program which allows them to keep working for a salary while enjoying the benefits of receiving a pension.

What kind of work can you still find as a pensioner? Here are a few examples:

• If you were into sports, why not coach a little league team?
• Clear out your home of unwanted stuff by holding a garage sale.
• Sell some of your stuff online.
• Share your expertise at a school.
• Stay in shape by walking the neighbor’s dogs or doing some yard work.