Secured loans for pensioners and the over 60s

How lenders typically treat it

A general guide to how the market behaves, not a promise about any lender. Criteria change and every case is assessed individually. See the lender criteria database for named lenders.

Can you get a secured loan as a pensioner or over 60?

Yes. There is no upper age at which homeowners stop being able to borrow against their property, and the second charge market in particular lends to people well into retirement. What a lender needs is the same at 68 as at 38: income that will reliably cover the payment for the whole term, enough equity in the home, and a credit history it is comfortable with. Age changes the first of those and shapes the term, but it does not change the principle.

Specialist secured loan lenders such as Norton Home Loans, Together, Pepper Money and United Trust Bank publish their age limits and the pension income they consider, and our lender criteria database lists them side by side. High street banks tend to be stricter, often with a lower maximum age, which is one reason older homeowners end up in the specialist market.

The commonest reason for borrowing later in life is card and loan balances that built up before retirement and now take too large a share of a fixed income. The case for consolidating them is straightforward if the arithmetic works: several high-rate payments replaced by one lower one on a fixed term that ends before the lender's age limit.

The case against it is equally straightforward, and it deserves equal weight. A secured loan is secured on your home. If you do not keep up the repayments, your home may be repossessed, and in later life there is less time and less earning capacity to recover from a payment that turns out to be too much. Free, impartial advice from MoneyHelper, StepChange or Citizens Advice before you apply is the best way to test whether the numbers really work.

What is the maximum age for a secured loan?

Most specialist lenders set a maximum age at the end of the term rather than at application, and the common range is 75 to 85. A few lenders have no fixed maximum and instead ask whether the income will last the term. The practical effect is on the length of the loan. If a lender's limit is 80 and you are 68, the longest term available is 12 years. If you are 74, it is six. That is why an older borrower's secured loan is usually shorter than a younger one's, and why the monthly payment is higher for the same amount.

Application age limits follow from this. A lender with an 85 end-of-term cap and a five-year minimum term can take an application at 80; one with a 75 cap cannot take you past 70. Some lenders also treat earned income as reliable only to a certain age, commonly 70, or lower for physically demanding work; beyond that only pension and other unearned income counts.

On a joint application, most lenders use the older applicant's age to set the maximum term. A minority will look at the younger applicant instead, provided their income alone covers the payment, on the basis that the loan would continue to be paid if the older borrower died. It is worth raising with the adviser, since it can add years to the term and cut the monthly cost.

A short term protects you as well as the lender. A 15-year loan taken at 66 runs to 81, through the years when health and income are least predictable; a ten-year term costs more each month but is finished sooner and the total interest is much lower. Our guide to how much you can borrow shows how the term feeds into the affordability calculation.

What income do lenders count in retirement?

More than many retired homeowners assume. The state pension is considered by nearly all lenders, evidenced by the annual letter from the Department for Work and Pensions or by bank statements. Occupational and private pensions in payment are considered in full, evidenced by the pension provider's statement or P60. Annuities are treated the same way. Pension drawdown is considered by many lenders, though they may want a recent fund valuation to satisfy themselves that the withdrawals can continue for the term of the loan.

Other income can count too: rental income, regular and evidenced investment income, and at some lenders a partner's pension on a joint application. Attendance allowance and similar benefits are considered by some lenders and not by others. If you are still working past 60, earned income is considered up to the lender's earned income age limit, after which they will ask how the payment will be met from pension income alone, and may ask for a pension projection to show it.

Affordability is then assessed on the same basis as for anyone else: the new payment must fit alongside your mortgage, if you still have one, and your other commitments, with the debts you are consolidating usually treated as cleared. Because pension income is fixed or slow-growing, lenders look closely at the margin between income and outgoings, and at what happens to that margin if one pension stops. A consolidation that turns £532 of monthly card and loan payments into a single lower payment can widen that margin considerably, which is often the point.

Should you choose a secured loan or equity release?

They solve the same problem in opposite ways, and the choice turns on whether you can and want to make a monthly payment. A secured loan is repaid month by month over a fixed term, so the debt shrinks and ends. A lifetime mortgage, the most common form of equity release, has no required monthly payment; the interest is added to the loan and the whole amount is repaid when the home is sold, usually on death or a move into long-term care. Both are secured on your home, both are regulated, and both are available from around 55 or 60.

The secured loan is usually the cheaper option over time and the one that preserves more equity, because the interest is paid as you go rather than compounding for years. It is the better fit for someone with a pension income that can comfortably carry the payment and a wish to leave the property as unencumbered as possible. The risk is the payment itself: miss it and the home is at stake.

Equity release is the better fit for someone whose income cannot support a monthly payment at all, or who wants to borrow without one. Products that meet Equity Release Council standards include the right to stay in the home for life and a promise that you will never owe more than the home is worth. The cost is that the debt grows, sometimes doubling in 12 to 15 years, and the equity left for care costs or inheritance shrinks with it. It can also affect means-tested benefits, and it must be arranged through a specially qualified adviser; Equiclear does not offer it.

Our equity release versus secured loan comparison sets the two out in detail, and MoneyHelper's later-life guidance is a good independent starting point. Our remortgage over 60 page covers a remortgage, including retirement interest-only, for those whose current deal has ended.

What does a secured loan cost on a shorter term?

More each month and less overall. Because an older borrower's term is set by the lender's age limit, the example below runs over ten years rather than the 15 used elsewhere on this site, at the same fixed illustrative rate. Fees are the usual set, generally added to the loan.

On a ten-year term the monthly payment on £20,000 falls from £532 to £242, and the total repaid is £28,992. The same loan over 15 years would cost £190 a month but £34,196 in total, so the shorter term that the age limit imposes saves about £5,200 in interest for an extra £52 a month. For a borrower on a fixed pension, the question is whether £242 fits comfortably every month for ten years, including after a partner's pension might stop.

If it does, a secured loan can be a clean way to end expensive debts before they follow you further into retirement. If it only just fits, pause. The loan is secured on your home, and if you cannot keep up the payments your home may be repossessed. StepChange, MoneyHelper and Citizens Advice give free, impartial advice on debt in later life, and will say honestly whether a loan, a debt management plan or a different way of paying the existing debts is the better route. Our guide to whether a secured loan is a good idea for debt works through the same judgement.

What improves your chances

• Gather pension statements, P60s, the state pension letter and three months of bank statements before you apply, so income is proved in one go.
• Ask for the shortest term you can afford comfortably; it keeps you inside more lenders' age limits and cuts the total cost.
• On a joint application, ask whether the lender will set the term on the younger applicant if their income alone covers the payment.
• If you are still working, have a pension projection ready to show how the payment continues after you retire.
• Keep your existing mortgage, if any, and every other commitment paid on time; credit history sets the rate more than age does.
• Take free later-life debt advice first and bring the budget to the adviser, so the application goes to a lender whose age and income rules fit.

Alternatives worth considering

Equity release is the obvious alternative for a homeowner over 55 who cannot or would rather not make a monthly payment, and our equity release versus secured loan comparison weighs it properly; it must be arranged through a specially qualified adviser. A remortgage, including a retirement interest-only mortgage, may suit someone whose mortgage deal has ended, and our remortgage to pay off debt over 60 page explains what lenders offer. For a small amount, a personal loan or a credit union loan avoids securing anything on your home. And where the debts are simply too large for a pension income, a debt management plan through a free debt charity may be the right route; our comparison with a debt management plan sets out the difference.