Car loans for pensioners
People receiving a pension may wonder if they are eligible to apply for and be offered a car loan. If you're in this position, there is no reason not to explore your options, and many lenders will assess your financial circumstances to examine your eligibility. Car loans for pensioners are personal loans, and when assessing your situation, lenders will look at all your financial details, including your credit history, the value of your assets (including your home if you own one) and what type of pension you receive. Pensioners with assets can be quite an attractive prospect for a lender, as a car loan could be secured on a home.
How do car loans for pensioners work?
A personal loan works the same way for pensioners as for anyone else, in that you borrow an amount of money to pay for your car, and then repay that amount with interest over a number of months or years. One to five years is usual, but you could get up to seven years depending on the lender and the amount you want to borrow. Putting down a deposit or trading in an older car will reduce the principal sum you’ll be loaned, and consequently reduce the repayments. Interest rates will vary, so you should make comparisons between lenders – a loan comparison calculator is a handy online tool.
Why do people use car loans for pensioners?
You may have assets in terms of savings or investments, as well as a home, where your money is tied up and you don't have the capital available to buy a car outright. So when you want a new or used car to replace what you have, a car loan will give you the freedom to buy one and plan your monthly repayments to suit your income and budget. Some lenders may be flexible and permit fortnightly or even weekly repayments, but you should work out what best fits your financial circumstances.
What are the main features?
Car loans are much shorter term than home loans, and it's why you should take the time to research and compare what is available, paying attention to interest rates, any upfront or ongoing fees, and checking if there are penalties for paying the loan off early. Some loans will offer lower repayments, but leave a residual – or balloon – payment that has to be paid off at the end of the loan before you can own the car outright. If you don't have the money available to cover this final payment, there is the option of refinancing and taking out a new loan to pay it off.
What are the pros and cons of car loans for pensioners?
Getting what you want immediately rather than waiting is a benefit of getting a car loan for a pensioner. If you have a loan secured on your property, you will be likely to get a lower interest rate, but make sure you repay on time so you don't face the prospect of the car being repossessed by the lender.