Banks deny
older people credit
Times
Online, March 29, 2003
You have a whiter than
white credit history, you own your own home and have a highly secure
income, yet applications for an unsecured personal loan are declined. This
is the frustrating predicament that retired borrowers are facing with a
number of lenders.
Unsecured
personal loan lenders such as Lombard Direct will not lend to anyone who
has passed their 66th birthday, regardless of their credit history and
ability to meet repayments.
Age
Concern, the charity for the elderly, says that there is evidence of
discrimination by financial services companies. It says older people are
often refused finance after a certain age, in part because the Consumer
Credit Act 1974 does not prevent lenders discriminating on age grounds.
Gordon
Lishman, director general of Age Concern, says: “Some older people are
turned down for financial products or services such as loans purely
because of crude assumptions about their age.”
The
good news is that times are changing and even those lenders currently
applying blanket bans to customers over a certain age are prepared to
think again. Lombard Direct told Times Money that it is in the
process of reviewing its policy towards older loan applicants.
As
it stands, applicants can request a Lombard Direct loan until their 66th
birthday, but it must be paid off by the age of 70. The advertised rate is
6.7 per cent for loans between £5,000 and £15,000, although this rate is
rarely offered. Most applicants receive a rate of 8.5 per cent.
Those
who think that they will have better luck with their bank should remember
that a set repayment age for retired people is often stipulated. Lloyds
TSB insists that personal loans are repaid by the time customers reach the
age of 75.
Do
not fall into the trap of thinking that the only way to obtain finance is
by taking out expensive loans advertised on television, which are aimed
specifically at retired people who have been turned down for unsecured
credit.
Not
all lenders penalise the applications of older borrowers. Tesco Personal
Finance has a positive view of silver applicants, rather than turning them
away on the basis that their income is pension and not earnings-based.
The
financial services arm of the UK’s leading supermarket makes favourable
comparisons between people with a predictable income from a final-salary
pension and the more sporadic cashflow of new graduates. Stuart Neill, a
spokesman for Tesco, says: “We consider retired people a very good risk
as pension income can be highly stable.”
Sainsbury’s
Bank and Nationwide also do not apply upper age limits: Sainsbury’s says
its typical rate is 7.2 per cent, while Nationwide quotes 7.9 per cent for
loans of £1,000 to £20,000, to be repaid over a period of seven years.
Liverpool
Victoria does not impose an age ban. But it says that if a loan is not
repaid before a borrower’s 80th birthday it will be individually
underwritten. It says that this does not affect the rate.
Anyone
considering a personal loan later in life should think about what will
happen in the event of death before the repayments are completed. Does
life insurance cover the loan or will a borrower’s family deduct the
debts from his or her estate? Loan protection insurance,which covers
repayments in circumstances when the borrower is unable to do so, is not
always available to retired applicants, even if the loan itself has been
approved. While both Halifax and Alliance & Leicester will lend to
those who are aged above 65, protection insurance is not available for
their loans.
Jason
Clarke, a spokesman for Halifax, says: “There is no age limit placed
upon unsecured loan applications. The criteria is that borrowers need to
be able to repay. While there is no requirement to take out repayment
insurance, customers must be under 65 at the end of the loan to qualify
for this protection.”
Although
increasing numbers of reputable lenders are putting a stop to age
discrimination for unsecured personal loans, obstacles still crop up if
borrowers need to fund home improvements or a new car.
Nick
Bamford, of Informed Choice, an independent financial adviser (IFA), says:
“Think very carefully before borrowing at all — what are you borrowing
for and what will be the total cost? Remember that this money must be
repaid by you or your family.
“Also,
look at all the options — it may be cheaper or more suitable to look at
remortgaging to withdraw a lump sum from the equity in your home. An
equity release plan may be appropriate.”
If
a personal loan is still the best option, but a prospective borrower is
finding it difficult to gain approval, he or she could consider turning to
their bank. However, it could be an expensive method of unsecured
borrowing.
David Scott,
of Alan Steel Asset Management, an IFA, says: “You could gather evidence
of an ability to meet repayments and ask an account manager about a
‘personal term loan’. Rates are worked out case by case and can be
higher than standard personal loans. But it is an option.”
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