Can You Be Too Old to Get a Loan?
People are living longer all the time, and not everyone chooses to retire at 65 anymore. “Old age” isn’t the inactive life it used to be. People today want to enjoy their retirement years to the fullest. This might mean travelling the world or even starting a new business. So how easy is it to finance your dreams when you get older?
Age limits for personal and business loans
Technically, there is no upper age limit for loans in Australia, as it is illegal for a lender to discriminate on age grounds. As with younger borrowers, each case must be assessed individually, to see how likely you are to be able to make the repayments.
As the population ages, lenders are becoming more willing to take risks lending to older customers. In 2009, a 98-year-old woman was approved for a 30-year mortgage! However, lenders may offer less favourable terms to an older applicant, such as expecting a higher level of security against the loan or shortening the repayment period, which is likely to make your repayments more expensive.
What makes you a risk worth taking?
Banks and lenders are looking for certain criteria when it comes to accepting loan applications, no matter what your age. Whether it’s a personal or business loan you are applying for, the main thing a lender will want to see is proof that you can afford to repay the loan.
It is likely to be easier for you to get approved for a loan if you can secure it against an asset, such as a property. This demonstrates to the lender that you can offer them something worth enough to cover the cost of the loan if you can’t meet your repayments. If you fail to meet the repayments and you have secured the loan against an asset, the lender has the legal right to take that asset away from you, even if it is your home.
Lenders are also looking for a good credit history, as this demonstrates your ability to keep up with regular repayments. They are likely to want to see your credit card statements and utility bills to prove that you are paying them on time.
They will also want to see proof of your ability to repay the whole of the loan, so they will look at your long-term finances, such as proof of employment or self-employment. If you have already retired, they will look at your income from pensions and savings.
Tips for a successful application
For both personal and business loans, you should know exactly how much you need to borrow and prepare a detailed repayment plan.
Make sure your bank account and credit rating are in good order.
Be able to provide proof of savings if you are applying for a personal loan. In the case of a business loan, you should be able to prove that your business is profitable and provide a business plan with financial projections, showing that your business is making enough money to repay the loan.
Older borrowers are often advised to secure a loan against property.
Before you apply for a loan, it’s important to shop around and make sure you are getting the best rates. A fixed rate loan is a safer option as this means your repayment can’t go up if the interest rate changes. It’s also worth remembering that the longer the repayment period of your loan, the more expensive your repayments are likely to be.
Ultimately, managing your repayments is all about planning. It’s a good idea to put some savings away each month to be prepared for any eventuality.
It’s also advisable to get financial advice from a professional before you get a loan or make any major financial decisions.