Loan facilities for pensioners

In the ongoing Covid-19 crisis, financial anxiety has hit every segment of society. Cost of living has escalated disproportionately to the income and the phenomenon continues without any reprieve in sight. Precisely, COVID-induced unforeseen needs have become order of the day as essentials of individuals have only multiplied. This has put a lot of pressure on their financial resources.

As the impact of the pandemic crisis has hit all sections, let’s today talk about financial needs of a specific segment of salaried individuals who have retired from active service, but still have an appetite to accomplish certain projects. There are retired individuals who look for financial assistance from banks to accomplish their dream projects, which can be purchasing/construction of a house, to run an enterprise, to get their children married etc.

Mostly, when a retired individual who has monthly pension as his/her only financial resource, hardly finds liberal financial support from the banks the way he used to get during his active service period. Even as banks have schemes in place to fund these retired individuals, precisely pensioners, to accomplish their projects, most of the times they discourage them on one pretext or the other. We have also found no such awareness programmes where banks proactively apprise their pensioners about loan schemes tailored for them in housing segment, personal consumption segment etc.

Notably, there are many retired government employees who have still appetite to work and be productive as entrepreneurs. But the financial constraints deny most of them to explore their potential. When they look at the banking and financial institutions to seek funding for their entrepreneurial projects, they get disappointed. The retired employees are hardly trusted by banks and financial institutions for business activities, as they feel age is not on their side. 

But the fact is that in the modern times, retired government employees still have time on their side. In so many cases, people start working after retirement in private sector. They get lucrative salaries and perks which are some times higher than what the government was giving them. 

Readers from this segment of society have continuously mailing lot of queries and they have been showing eagerness to know about the financial schemes which can fund them for construction of a house, marriage expenses of their children or to start an entrepreneurship activity. So, let’s today have a look at these queries

Can a retiree obtain a home?

Obtaining a home loan is considered a tedious process even for working individuals. This is because of certain eligibility criteria demanding a series of documents and various approvals. And for retirees, it just seems impossible because their income source is not considered steady and is limited.

However, there are ways through which a retiree can obtain a home loan. For example, if a retiree applies for a home loan with a working individual, preferably within his family, then the chances of its approval are bright.

Here a good credit score of the retiree will also help the retiree to obtain the home loan. Notably, a good credit score is one of the most important factors considered by banks for sanctioning the home loan.

There are home loan schemes offered by banks which entitle retired employees to obtain a loan and age of the applicant is also important in deciding the quantum of finance. Normally, a retired person can get a home loan but only from the bank in which he/she has a pension account.

Is J&K Bank having any such facility for pensioners?

Yes. J&K Bank’s housing loan scheme offers loan to retired employees of State / Central Government and Public Sector Undertakings. The applicant’s age limit is 70 years. He/she can procure loan upto 36 times of the net monthly pension subject to the condition that loan sanctioned shall be fully repaid by the time pensioner attains the age of 70 years and total deductions do not exceed 50% of his/her monthly income. Notably, estimated income tax / TDS, PF contribution, premiums towards insurance and other compulsory deductions are included for computing gross deductions.

The loan can also be granted for repairs/renovation/additions/alterations of the existing house.

In terms of security against loan, the house will be mortgaged to the bank. In addition to this, the pensioner has to submit guarantee of spouse / Legal Heir(s), who is / are entitled for family pension.

Is there any scheme which can finance a retired employee for his business venture?

Let me talk in the context of J&K region. J&K Bank has taken a lead in the banking fraternity by introducing a finance scheme (‘Start Again’) to finance start-ups of retired employees below the age of 65 years in greenfield enterprise in manufacturing and services sector.   

Some of the indicative ventures eligible for finance under the scheme include media & entertainment, tourism, healthcare, IT & allied services, food product sector, arts and crafts etc. Besides, ventures like fitness centre, kinder garden / pre-school, formal school, crèches, tuition centers also fall under the ambit of the  scheme. 

Notably, projects allied to agriculture such as pisciculture (fishery), apiculture (beekeeping), poultry, livestock, dairy, agri-clinics & agribusiness centers, aggregation agro industries, food & agro processing, etc. are also eligible for funding.

Quantum of Finance is linked to the nature of activity and ranges between Rs.2.00 Lakh to Rs. 20.00 Lakh. However, the scheme has a provision of extending enhancement facility or an additional working capital facility to such units of the retired employees which generate employment. The enhanced / additional facility ranges from Rs 1.00 Lakh to Rs. 2.00 Lakh which will be basically funding the salary component of the employees working in the unit. 

The loan is to be repaid within 7 years including a repayment holiday of two years.

I have a house whose market value is more than Rs.50 lakh. I want to raise loan against this house. Later, my plan is to liquidate the loan by selling off the house. Is there any such scheme through which I can access funds to fulfill my needs?

Mortgage loan is one of the popular loan schemes for senior citizens. There is an option for the senior citizens to raise loan against property. The individual can mortgage unencumbered residential house/flat, commercial/Industrial property with a clear marketable title. In this case the loan amount is linked to the monthly/annual income of the borrower. Here the income of the spouse can also be taken into consideration for determining the loan amount. The loan is to be repaid in a fixed period of time through equated monthly installments (EMIs).  

Then there is a special product option where the senior citizen can take loan against the owned house property and need not to repay the loan in monthly installments. A borrower can prepay it at any time during the tenor of the loan. Otherwise the loan is recovered after the death of the borrower by putting the house on sale. This option is known as ‘Reverse Mortgage Scheme (RMS)” which banks have been peddling for quite some time now.

It would be better to contact your bank for such scheme. Here, very few banks offer Reverse Mortgage Loan facility to its customers.

What are the parameters of cash loan scheme for pensioners? The amount of loan in this segment is linked to the age of the pensioner. For example, pensioners who receive their pension from J&K Bank are entitled to procure personal consumption loan.Pensioners up to the age of 70 years are entitled to get 18 months’ net pension and above age of 70 to 75 years, the loan amount will be equal to 12 months’ net pension. Notably, family pensioners upto the age of 70 are also entitled personal loan amounting to 12 months net’ pension or maximum Rs.2 lacs. The loan is to be repaid within maximum period of 5 years in equated monthly installments. It’s to be noted that spouse eligible for family pension have to be co-applicant.