Dubai: If you are over the age of 60, you may have faced some challenges trying to get a credit card or a personal loan. While there is no age restriction on applicants who wish to apply for lending products like credit cards, car loans or mortgages, banks may reject your application for certain reasons, according to financial experts who spoke to Gulf News.
Let’s look at why it may be harder for senior people to get a credit card or loan application approved, and how they can resolve the problem.
Why is it harder for senior applicants to get their applications approved?
While there are no institutional challenges for those above the age of 60 to apply for a credit card or loan, banks may have an unwritten rule of avoiding risks related to aged persons, according to Andrew Cole, Director – Sales at The Continental Group, an insurance brokerage and financial services provider.
“The maximum age limit for personal loans and credit cards in the UAE is 65 and 75, respectively. However, those are just a rule of thumb. Eligibility criteria like mandatory employment and creditworthiness take precedence over age. Therefore, as people over 60 tend to be retired or nearing retirement, their eligibility for unsecured credit cards or loans further declines. Exceptions would be collateralised loans, including home loans, where banks tend to be flexible with age,” he said.
The maximum age limit for personal loans and credit cards in the UAE is 65 and 75, respectively. However, those are just a rule of thumb. Eligibility criteria like mandatory employment and creditworthiness take precedence over age.
Anita Yadav, CEO of Global Credit Advisory Ltd., also spoke about how while older individuals may find it easier to access ‘deposit products’ – where they may wish to invest money or want to trade – borrowing products, like car loans, home loans or credit card can be difficult to get.
“Banks obviously want to make sure that they can get back the money they give, for which they would need to see regular income. Those over the age of 60 may have saved up money and thus have a high asset base. However, they may not be having a job, or even if they do have a job, it may have an irregular income, as they may be self-employed or may not be in the same job for very long. So, the cash flow is poor,” Yadav said.
Another factor that comes into play is the insurance, which is more expensive for older applicants.
“When banks give home loans, they want to make sure that the person has life insurance, because if something were to happen to the person, the bank’s home loan is paid for through the insurance,” she added.
However, Yadav added that this was the case across the world, with the only exceptions being countries where there are social security measures like a regular pension amount being deposited in a person’s account.
Banks obviously want to make sure that they can get back the money they give, for which they would need to see regular income. Those over the age of 60 may have saved up money and thus have a high asset base. However, they may not be having a job, or even if they do have a job, it may have an irregular income, as they may be self-employed or may not be in the same job for very long. So, the cash flow is poor.
Not big spenders
When it comes to credit cards, Yadav also stated that typically older customers did not spend as much as younger ones.
“Banks make money the more people spend – they more they use the card, the higher the revenue generated. Elderly people don’t spend as much, so giving them a card is not a very profitable transaction for them,” she added.
5 ways in which you can work around this problem
So, while it may be harder for a person above the age of 60 to get such financial products, there are different ways in which you can make your application stronger.
1. Consider a term deposit
When it comes to credit cards, you can get one more easily if you have an amount deposited with the bank.
“You get the credit card against the deposit. Usually, the credit limit of the card is 60 to 80 per cent of the term deposit,” Yadav said.
2. Collateralised loans may also help
According to Cole, banks tend to be flexible with age when it comes to collateralised loans, including home loans. Collateralisation is the use of an asset – like property or investment portfolio – as collateral to secure a loan.
“A few banks do provide credit cards and personal loans tied to certain securities. In some cases, senior residents may be charged higher interest rates due to banks’ perceived risks,” he said.
3. Apply for permanent residency
“Financial services like personal loans require the loanee to be employed by a company recognised by the bank. So, anything other than a permanent residency or employment visa — retirement, investor, or family visa — runs the risk of rejection. However, the UAE Central Bank does give banks the discretion to make exceptions on a case-by-case basis. A Golden Visa would be a good case in point,” Cole said.
4. Get a supplementary credit card
If you have a younger family member member living in the UAE with you, you can also consider getting a supplementary credit card, with their card being the primary one.
5. Use a guarantor
Another way in which older applicants can get their loan requests approved is if their child or a younger person becomes a guarantor for the loan. This can be helpful when it comes to home loans or car loans.