- Emma Anderson
- August 2, 2022
Individuals weigh down the plus and drawbacks before retiring. Likewise, you’ve got everything in place to ensure a comfortable retirement, from insurance to retirement and emergency funds.
However, retirement is a wish-fulfillment journey, and one desires to live the most of their life by then. Do you constantly ponder whether or not- “taking a car loan with no credit check right post-retirement? The answer is- yes, you can.
But- is it ideal for exhausting retirement savings to pay for a car loan?
Read ahead to know.
Why do retirees scroll car loans?
Well, yes, it is never too late to live the life one wishes to, and retirement is just the apt phase. Here is why retirees might be considering a car loan post-retirement:
- You are ensuring fewer liabilities for your kids or grandchildren.
- Wish to explore places after retirement in your new car.
- You have left with enough retirement money and would like to replace the old car with a new one. In this case, a car loan is a feasible option.
- Purchase a new car by selling the old one quickly at good rates.
- Hold good equity in home and investments
- A good credit history
What Do Lenders Look for While Providing a Car Loan to Retirees?
Though there are provisions for retirees to opt for a car loan, qualifying for the same is challenging. Retirees may find it easier to qualify for quick loans with no credit check than for a car loan. Quick loans are short-term loans that have fewer liabilities and quick payouts.
However, for car loans, lenders require a few more details on the part of the borrower. Car loans are risky in retirement. The lenders look for the below parameters:
Lenders set a maximum age for primary loan applications. Sometimes, borrowers can only apply until they are 70-75 years old. Analyze the age restrictions before applying for a car loan. Check if there are any lenders you qualify for post-retirement.
b) Income source
If you wish to buy a car, plan before retirement. Many individuals in the UK are postponing their retirement to eliminate liabilities and prepare for future retirement. They save until they believe the sum is sufficient to fund their dreams. Lenders consider income source as the repayment measure on the car loan. If you earn less than the repayments over the loan, then it may affect the approval.
It is also one of the ways to apply for and get a car loan. Analyze the assets you have garnered over your professional life years. In this, you must link an asset to qualify for the loan. If you cannot repay it, you may lose the asset staked to the lender.
It is why it is always better to apply for a car loan years before retirement. If you have a consistent income and good credit, you may easily qualify for a car loan with no credit check. Moreover, even if you default, you share a regular income back up to pay for it, which you lack in retirement.
Thus, evaluate the pros and cons of a car loan post-retirement. If you believe and qualify for the standards the lender sets, you may only go for a car loan if it is a must.
Some individuals avoid entering a debt trap by utilizing their retirement account money.
What is a SIPP?
Sometimes, employers’ pension is insufficient, and individuals apply for SIPP (Self-Invested Personal Pension). It grants more flexibility to individuals as the owner gets 100% of the money invested and does not share any investment limit.
Individuals living in the UK may qualify for the state pension, and the requirement is to make enough contributions toward national insurance. When you invest in a SIPP, the government covers 20%. For example, if you decide to save £200, you only pay £180 towards your account.
The government could pay more for your savings if you are a higher taxpayer. As per the 2022 rule, you can only pay either £40000 or total earnings, whichever is lower. If earnings exceed £40000, you will have to pay tax on additional contributions towards SIPP.
One can withdraw up to 25% post turning 55. The authority grants flexibility to take the whole amount in a single lump sum or use it only when necessary. Another option is to get a paid monthly income per the pot size.
If you need to cover high-interest debt quick loans with no credit check urgently, you can switch SIPP to borrow in necessity. However, evaluate other ways to pay before tapping into the fund. Sipp is one of the smartest ways to boost your retirement savings.
Are You Thinking of Tapping into SIPP To Buy a Car? Think Again!
If you are thinking about drawing a sizeable sum from your SIPP, your years-long contributions would be next to nothing. Undoubtedly, tapping into SIPP might seem the most lucrative option for funding dreams. However, it could prove costly if not transacted ideally.
As you save towards a SIPP fund, you could claim tax relief. But the whole amount is taxed when you withdraw unlimited money to serve a purpose.
The government provides tax relief on 25% withdrawal. If you borrow, say 45%, you will have to pay £150,000 or more tax per the latest changes.
Thus, think twice about making payments towards a car loan with a no credit check from SIPP. You have worked nearly 60years of life, ensuring a comfortable retirement; it would not be ideal to throw half of it into the income tax.
If you have good years ahead of you post-retirement, seek other ways to get a car instead of tapping into SIPP. It could prove risky and exhaust all your savings until now.
Buying a car in retirement might seem a lucrative option. However, tapping into SIPP to fund the loan could prove a blunder. Evaluate other sources of income to qualify for a car loan at a later stage.