Providing financial security for the elderly people is one of the main duties of the Government for which there have been several pension schemes launched for both organised and unorganised sectors. The pensions are deposited in the bank account of the beneficiaries each month. The pension money is provided to the senior citizens post their retirement or after a particular age. 

Though the pension amount may help meet daily expenditures, it would be hardly enough if there are any financial emergencies. In such instances, the pensioner may have to look for money elsewhere. Realising the needs of the elderly people, every bank has launched a loan scheme. These loans carry lower interest rates, zero prepayment charges and processing fees. 

Procedure to Apply for Loan Against Pension

Loan against pension is generally a personal loan offered by banks for pensioners. Following is the procedure that can be followed for applying for the loan. 

Applying Online:  With the advent of the digital technology, it is easier to apply for a loan against pension online. You just need to visit the official website of the bank where you withdraw pension; most of the lenders offer personal loans to pensioners only if they withdraw the pension amount through their bank. You may not get a loan against pension if you try applying with another bank. Following are the steps to follow while applying online:

  1. Visit the official website of the bank where you withdraw the pension amount

  2. Click on ‘Apply Online’

  3. You will have to enter the details of your pension account number and registered mobile number, etc. 

  4. Submit the form to check for your eligible loan amount

  5. After you have received your eligible amount, you can acknowledge and give confirmation. 

  6. Your loan application will now be processed for approval. 

After submission of the application form, you will be informed about the approval and the loan amount will be disbursed to your bank account. The loan sanction may vary from lender to lender. 

Offline: You may visit the nearby branch of the bank where you withdraw the pension amount. Seek the help of an executive of the bank to proceed with the application process. This is pretty much similar to the process of applying for a personal loan. You will need to have your pension account number and other proofs to proceed with the application. After submitting the application form, you will be informed about its status via email, SMS or through telephone. Post your acknowledgement to the terms and loan amount, the loan will be disbursed to your account. 

Apart from the above methods, you may also call up the customer care support of the bank to get doorstep help. 

Additional Reading: How to Get a Loan Against Your Pension?

Features and Benefits of Loan Against Pension

  • Eligibility: The pensioner must draw the pension amount through the respective bank to become eligible for the loan amount. 

  • Age: The age limit may vary from bank to bank. However, in general, the maximum age limit to apply for the loan is up to 76 years. 

  • For Government employees, the pension should be disbursed by the Government treasuries. 

  • Loan Amount: The loan amount varies from bank to bank. The minimum loan amount starts from Rs. 25,000. The maximum amount can be up to Rs. 14 Lakhs based on eligibility. 

  • Repayment Period: The maximum tenure on the loans for pensioners is up to 84 months. 

  • Security: No collateral is required to be pledged to obtain the loan. However, the pension amount acts as the security for the lender to sanction the loan. 

  • Processing Fees: The processing fee in pension loan is lesser when compared to a normal personal loan. It is usually up to 1.8% of the loan amount. Certain lenders waive off the processing fee for loan against pensions. 

  • Prepayment Charges: In general, the maximum prepayment charge levied by the bank is up to 3% of the loan amount. In certain cases, there are no foreclosure charges. 

  • Interest Rates: The minimum interest rate on a pension loan ranges between 11.25% to 13% and maximum interest rate can be up to 17%. 

Things to Know Before Applying for A Loan Against Pension

There are certain terms and conditions that you must know if you plan to apply for a loan against pension. Following is an overview:

  • The pensioner must withdraw the pension amount with the respective bank. 

  • Any default of the repayment will attract a penal interest of certain percentage which may range between 1% to 3% per annum. 

  • The pension amount of the Government employees must be disbursed by Government Treasury. 

  • The banks do not accept the request to transfer the pension account to another bank until the repayment is completed or NOC is issued. 

  • Banks charge 18% of GST on services and charges related to pension loan. 

Top Banks Offering Loans for Pensioners

Below are the features of the pension loans offered by some of the top lenders in the country.


 Features  SBI  Punjab National Bank   United Bank of India  Tamilnad Mercantile Bank
 Loan Amount  Up to Rs. 14 lakhs   Up to Rs. 7.5 Lakhs  Up to Rs. 10 Lakhs   Up to 95% of the pension amount
 Tenure  Up to 84 months  Up to 5 years  Up to 4 years  -
 Rate of Interest  11.95% - 12.45%  TL/DL: BR+2.50%  13.40%  14.45%
 Processing Fees  0.5% + GST  Nil  1.18% of the loan amount   1% of the loan amount
 Prepayment Charges   Up to 3%  -  -  -
 Margin  Nil  Nil  Nil  5%


Parting Note

Pensioners now have a choice to borrow through a formal lending system without having to look up to anyone for a lump sum of money. The loan can be used for any financial emergencies or short-time financial requirements.

Additional Reading: 5 Personal Loans for Pensioners