Loans for retirees: discover the options

After years of contributing to social security, it's time for a well-deserved break. We're talking about the long-awaited retirement. But what if you run out of money? There is the option of a loan for retirees.

But, as not everything is rosy, unforeseen events can arise, causing a retiree's financial life to be shaken. In times like these, the realization of a loan could be the perfect solution to get your finances back on track. But how do they work? loans for retirees?

What is a loan for retirees?

Despite being a very common term in our society, there are still many doubts about loans for retirees.

A loan is a contract between a customer and a financial institution. Under this agreement, the customer receives a sum of money from the bank. This amount must be repaid to the bank within a contractually determined period, with an additional interest rate pre-defined at the time of the loan application.

This resource is widely used to pay off debts, deal with financial contingencies or even to acquire material goods.

Personal or payroll loan?

Now that you know how a loan works, it's time to learn more the credit options available to retirees and how each one works. They are:

Payroll loan

In this first option – perhaps the best known – the value of the loan installments is discounted directly from the retiree's payroll.

Because the discount is automatic, this practice is quite common, as it helps reduce the risk of late payment due to forgetfulness. It also helps reduce the default rate.

Personal loan

With a personal loan, you can pay installments in the most traditional ways: direct debit, bank slip, and even checks.

How loan interest works for retirees

Another advantage of payroll loans is that, compared to personal loans, the interest rates are lower. Since the loan installments are already deducted from payroll, the financial institution understands it runs a lower risk of defaulting on payments. On average, interest can reach 2% per month.

When it comes to personal loans, the situation changes slightly. As we explained earlier, due to the repayment model offered by this loan, the lending institution understands that the risk of not receiving the agreed amount by the due date is greater, resulting in the higher interest rates that everyone is familiar with.

In addition to this higher rate, this loan model also has the APR.

The CET (Total Effective Cost) is essentially a fee for the bank's service provision. It includes all charges, taxes, fees, and expenses of a loan.

Loan amount for retirees

This is quite relative.

Many factors are taken into consideration when releasing a loan.

While in personal loans, income and credit analysis are decisive factors in approving or denying a credit application, in payroll loans the dynamics change slightly: in addition to restrictions and release rules that vary from bank to bank, in this model, the factor that defines the amount loaned is the size of the installment in relation to the benefit received by the retiree.

The value of the installment may compromise up to 30% of the retiree's salary.

Does age influence the amount released?

Yes. Generally, financial institutions grant loans—or payroll credit cards—to people up to 80 years and 11 months old. Of course, this can vary from bank to bank, but in most cases, this is one of the criteria used. An example:

for credit applicants up to 79 years and 11 months old, the The loan amount released for him can be up to R$ 80 thousand.

in cases of retirees up to 80 years and 11 months old, the maximum value decreases a little, reaching up to R$ 30 thousand.

Although this is a nearly unanimous criterion among financial institutions, there are some exceptions. In these cases, retirees should ideally research which banks are open to negotiating these amounts.

Beware of scams

Unfortunately, scams targeting retirees involving retirement benefits and loans (both payroll and personal) have become increasingly common. Criminal gangs specialize in such scams.

Therefore, to ensure financial security, the tips are:

Never pass on personal data to strangers, whether by phone or internet.

Be wary of loan plans with overly advantageous terms.

Always keep an eye on your bank account transactions, and if you notice any suspicious activity, contact your financial institution immediately.

Whenever you're making in-person banking transactions, always go with someone you trust. But if you need to go alone, never accept help from strangers to complete your financial transactions.

What is the best loan option for retirees?

Taking into account the aspects that were addressed during the text, the payroll loan ends up being a more viable alternative for retirees who need money.

Lower interest rates and direct payroll deductions are very attractive factors in decision-making.

Of course, this is an opinion taking these specific aspects into consideration.

In both credit models, it is necessary to carefully evaluate all options, always taking into account the positive and negative points of each one before applying for any of them.

Regardless of the option chosen, one thing must always be taken into consideration: when taking out a loan, we are taking on a debt, which, as stated in the text, can compromise up to 30% of the retiree's benefit.

Therefore, it is necessary to adapt so that this moment does not turn into a huge headache.

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loan payroll loan loan for retirees

Nathalia P. Silva 21 de September de 2021