Therefore, it is a myth that older people find it difficult to obtain credit. Two-thirds (66 percent) of all seniors who apply for a loan through Verivox receive at least one financing offer from a bank. This means that the offer rate for people over 65 is about the average of all those interested in borrowing (68 percent).
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Longer credit periods
As the Verivox study also shows, banks are now giving longer loan terms to seniors as well. As a result, the average size of loans to seniors has increased by more than $5,000 in the last five years. “Banks have designed their lending guidelines better and better to meet the needs of seniors in recent years,” explains Mayer, an expert at Verivox.
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But even this has its limits. “Loans still have to be repaid before age 75 or 80 in many financial institutions at the latest,” he says. “But within these age limits, longer loan terms and higher loan amounts are also now possible for most institutions.”
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Increase the amount of the loan by more than 5,000 euros
Five years ago, the average loan term for seniors was just 55 months. Today, the term is 68 months on average, which is slightly longer than that of Verivox customers in total (67 months).
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However, if you have more time to pay, you can finance higher loan amounts with the same monthly payment. For this reason, the average amount of loans for the elderly has increased by more than 5,000 euros in the same period, going from 12,293 euros in 2018 to 17,407 euros this year.
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Extra exorbitant costs for longer periods
However, longer loan periods have a downside: the longer consumers take to pay off their loan, the longer they will pay interest. Therefore, this raises the total costs.
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- Example: Who contracts a loan of 17,000 euros at the average interest rate of the elderly (2.85 percent) and repays it in four years, has to pay a fee of 375 euros per month. With a loan term of six years, the individual monthly installments will be 118 euros less, that is, 257 euros. But over the full term, the interest costs add up to 1,495 euros. This is €501 more than the amount borrowers have to pay for a four-year loan (€994).
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However, borrowers should not push the limits of their financial flexibility. After all, they should be able to pay their loan payments for the full term. Ultimately, an installment loan remains an individual decision, which should be well considered.
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methodology
For the study, Verivox evaluated all installment loans requested through Verivox in 2022 (until the end of May) and 2018. To evaluate the interest rate, the comparison portal takes into account the cheapest financing offer received for each loan application and forms the average value of all these offers. Half of all potential borrowers received this or a lower interest rate. Verivox has assigned all customers over the age of 65 to the Seniors group.
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