Unlike retired employees, pensioners experience this. With their old-age pension, they have a secure income that will flow to the end of their lives. They can no longer lose a job.
This advantage could actually be a good prerequisite for the fact that a small loan for pensioners is easily granted. But that’s not the way it is – many banks only give small loans to pensioners if they can provide a younger guarantee. Although pensioners do not lose their jobs, they may lose life before the loan is repaid.
The so-called biological risk weighs so heavily that pensioners really struggle to get a small loan for pensioners when they are of a certain age.
The age limits for lending
Many consumers are not aware that there are age limits. Most people know that if you want to take out a loan, you have to be 18 years old. Only those affected – the pensioners – notice that there are age restrictions. Many banks used to end at 70 years old. Today, the age limits that each bank sets individually are somewhat softened and partly adapted to the significantly higher life expectancy. Seniors today are on average far older than 80 years. The purchase guidelines at the banks do not take this into account in any way.
If pensioners are lucky, they get a loan in their mid-70s that runs for twelve months. More is usually not possible without a recent guarantee. For pensioners who are 75 years and older, it is hopeless if they apply for a small loan for pensioners without a younger guarantee.
According to the banks, the biological clock is ticking particularly quickly. Consumer advocates rightly speak of a form of age discrimination. However, since there is freedom of contract for banks, politicians cannot force banks to lend to pensioners in their mid-70s and older.
The banks’ concern is completely unjustified. Almost all pensioners have heirs. A borrower should actually die before the loan is repaid. The relatives inherit not only the savings of the deceased, but also the liabilities, so repaying the remaining debt should not be a problem.
Do not cover the small loan for pensioners with residual debt insurance
Banks that lend a loan to pensioners are only too happy to try to sell pensioners a residual debt insurance policy that will replace the loan in the event of death. This residual debt insurance is not recommended for pensioners. Even if the conclusion were still possible, the residual debt insurance would be so expensive that the loan costs would increase significantly.
The risk of death is also higher for insurance for older people, and the premium is correspondingly expensive. Pensioners who are only interested in a cheap small loan or who want to take advantage of zero-percent financing, because the loan will then cost them nothing, would have to bear high costs for the insurance premium, which are apportioned to the monthly rate.
For many pensioners, this is opaque overall because zero percent financing for a small loan remains so, even though the borrower has to bear high borrowing costs. Banks are prohibited by law from making residual debt insurance a condition for lending. If they do so, the cost of the insurance must be reflected in the effective interest rate. It would then be so high that pensioners would not take out the loan.
It is not easy for pensioners to get a loan. The biological risk is overestimated by the banks. Pensioners who are creditworthy can easily get credit if they submit the application together with a younger guarantor. Pensioners should not get involved in taking out residual debt insurance to cover death, as this can be expensive.