Retirement is a milestone in most people's lives. For many people it marks the period when they can finally relax and enjoy life after decades of working.

At the same time, it is also a time when your finances may change. With no income, other than a pension, it can affect your ability to borrow as lenders may see as you to be a greater risk.

But that doesn't mean that you can't get a loan when you're retiring.

What do lenders consider?

  • Your age: Lenders set a maximum age for loan applications, and some may restrict a loan's term to meet a set age, e.g. your 75th birthday. Look out for age restrictions when you compare loans.

  • Your income: Check what your income will be when you retire, then work out how much you'll need to cover your monthly outgoings. If your income is lower, it could affect how much you'll be able to borrow.

  • Your assets: If you choose a secured loan, you need to link it to an asset you own, like your property if you're a homeowner. If you cannot repay the loan, the lender could repossess your property.

If you want to get a loan before you retire, but expect to retire during the loan's term, make sure you can cover your repayments on your retirement income.

Alternatively, you could try to repay the loan before you retire.

Why would you take out a loan as a retiree?

Just because you're retired or retiring doesn't mean you shouldn't borrow anymore. You may need to make a large purchase or make home improvements, but most of your funds are invested in assets.

A cash loan can help you fund those without having to divest from your investments.

In what situations will lenders consider retirees for a loan?

If you are retired but have a good credit history, an adequate pension, and equity in your house, taking out a personal loan to fund a purchase or project might be wiser than divesting from any assets or investments.

This is especially true in an economic climate where interest rates are low and stock market investments are performing well.

Alternatively, it's possible that you're working part time and earning enough, in addition to your pension, to afford the repayments for the loan you want.

What types of loans can I get as a retiree?

As long as you meet the lender's eligibility requirements, you can get any kind of loan. These include:

  • Personal loans: These are the most popular option. Unsecured loans pay out a cash lump sum, which you repay through fixed monthly payments over a fixed term.

  • Credit cards: Though credit cards different from personal loans, they can be used as personal loans. If you need to make a large purchase, you can take out a credit card with an interest rate of 0% on purchases for a promotional period, which can last up to two years.

  • Mortgages: If you have a lot of equity you could remortgage some of that equity in order to raise finance. Lenders will consider borrowers who are between 70 and 85 when the term ends, but it varies according to the lender.

  • Equity release mortgages: With an equity release mortgage, you can enjoy the equity in their home without having to repay the interest during their lifetime. These are suitable in some circumstances but affect your spouse and childrens' inheritance so require careful consideration. Rates on these loans also tend to be higher than on standard mortgages.

  • Car loan: A car loan offers competitive rates and is easier to obtain because it is secured by the vehicle you are buying. Paying with cash could save interest but only makes sense if it doesn't deplete your savings. But in the event of an emergency, you can sell the car to recover the funds.

  • Debt consolidation loans: A debt consolidation loan is designed to do just that: consolidate debt. This type of unsecured loan refinances your existing debt. Generally, this may mean you will be paying off this debt longer, especially if payments are lower. In addition, the interest rate may or may not be lower than the rate on your current debt.

Any loan that is secured against your home, puts your home at risk of repossession if you cannot repay the loan.