Most everybody goes through financial rough patches at one point or another in their life. Sometimes some help is necessary to get through a hard time and get back on your feet. In addition to temporary funding, auto loans and mortgages are often necessary as most people don’t have enough money just lying around to purchase a vehicle or home outright.
Many retirees and other social security beneficiaries are under the impression that they cannot obtain a loan of any kind because they don’t have the typical salary or pay stub other borrowers use to be approved for funding. While it might be more challenging to qualify, it is definitely possible to qualify for loans with social security income.
How Social Security Benefits Work
Social security income is raised through taxes to help provide income for those who cannot work. Social security and disability benefits are handled by the U.S. Federal Government’s Social Security Administration and are vital to the American economy.
Those who hope to receive social security income once they reach retirement age, not disability benefits, must earn enough social security credits during their working years. Social security disability insurance does not rely on a credit-based system but instead on the strict guidelines for qualification set by the Social Security Administration.
Social security payments typically do not make up the entirety of a retired individual’s income. Many individuals prepare for retirement with investments, savings, and pensions to supplement the income they receive from the Social Security Administration.
Income Verification For Loan Approval
In the loan application process, lenders look at multiple factors of a borrower’s overall finances before approving or denying the loan. A borrower’s creditworthiness plays a significant role in qualification, which is why lenders always perform a credit check to see if the borrower meets their minimum credit score requirement.
But a borrower’s credit score is not the only important consideration. Being approved to borrow money also requires a qualifying income to prove that the customer has the ability to repay the loan through a scheduled monthly payment. An individual could have the best credit score possible, but if they don’t have a consistent, fixed income high enough to afford the monthly payment, then how can a lender justify approving them for financial products?
All loans require some kind of income verification, including personal loans, payday loans, mortgage loans, auto loans, and online cash advances. Some have stricter requirements than others but all need at least some proof of income in the loan application process.
Can You Use Social Security Benefits As Income To Get a Loan?
Standard or regular income, such as pay stubs or a salary, is not the only type of income that is acceptable to lenders. Most lenders accept non-traditional sources of income as valid. When it comes down to it, all that matters is that you have fixed income coming in regularly, not where it is coming from or how you receive it.
Sources considered income and readily accepted in loan applications include:
- Social security benefits.
- Supplemental security income (SSI) and disability benefits.
- Child support and alimony.
- Pension and investment income.
Though these sources are considered income by lenders, the amount of fixed income they bring monthly may not be sufficient enough to qualify you for the personal loan or mortgage loan you are applying for. The amount has to prove your ability to repay the loan regardless of the source.
Qualifying For a Mortgage With Social Security Income
A mortgage lender looks at your annual gross income when they are determining your eligibility for a conventional mortgage loan. Everything is included in your gross income, from social security benefits and disability benefits to child support and regular income. Therefore, all of these forms of income can be used in your mortgage application.
If your social security payments are high enough to make up a monthly gross income sufficient enough to cover the mortgage payment, then you may be able to qualify for a mortgage loan on social security income alone.
Qualifying for Personal Loans With Social Security Income
Personal loans are incredibly varied and have widely different qualification requirements depending on the loan type and lender. Social security payments and SSI benefits can be used as proof of income for personal loans as long as they are significant enough to afford the payments.
There are several types of personal loans that work better for low-income individuals than others. Here are a few personal loan options that may be easier to qualify for using SSI benefits or social security payments:
Secured Personal Loans
A majority of personal loans are unsecured, which can mean that they are higher risk for lenders leading them to have stricter income and credit requirements or steeper interest rates. Secured loans can be a better personal loan option for individuals with limited income, perfect for those whose primary income source is social security benefits.
A secured personal loan utilizes collateral to minimize the risk a limited income or low credit score might pose to a lender. Using collateral when borrowing money can enable borrowers to be approved for a loan when they might not have otherwise due to other factors.
Quick Cash Loans
Quick cash short-term loan options can be another good option for those who need some temporary funding with a limited income of social security benefits. These financial products are typically used as lending options for individuals with a bad credit score. However, anyone considering quick cash funding like payday loans or online cash advances should be warned that they can have very high-interest rates making them challenging to repay on time.
Payday loans are a popular kind of short-term loan that are meant to help you cover expenses until your next paycheck. Borrowers are allowed to use their social security benefits to qualify for them, but it can be incredibly costly due to the incredibly high-interest rates. Typically, payday loans need to be repaid in one lump sum at the time of the borrower’s next pay date. Payday lenders have been known to engage in predatory lending practices, so it is vital that you do your research on any payday loan company you are considering working with.
Cash Advance Loans
Social security income can also be used to qualify for an online cash advance loan which functions very similarly to a payday loan. However, there can be more variety from online lenders who may not require the loan to be repaid in one lump sum like a payday loan. Though a credit check is often necessary, many borrowers can qualify for a cash advance personal loan despite a poor credit score as long as they are willing to pay higher interest rates.
Benefits of Working Part-Time After Retirement
Many seniors decide to continue working post-retirement even when the Social Security Administration provides enough social security income for them to live off of. There is a myriad of reasons why a retiree might continue to work after their career comes to a close.
Even for those who are well-prepared for their financial future with a full bank account ready for retirement, daily life without the driving force of purpose that work can bring might feel empty. Depression is a significant issue for retired seniors, and a major contributing factor is the sudden loss of routine. For this reason, many retired individuals decide to take on a part-time job so that there is always something to get out of bed for in the morning. A little pocket money to cushion their bank account doesn’t hurt either.
Stress-Free Jobs To Make Some Extra Money After Retirement
Some of the most popular part-time jobs among retirees bring about a sense of community, purpose, and fun. Working after retirement is no longer about making as high of a salary as possible but rather about adding a routine to your daily schedule and doing what you enjoy.
Here are a couple of the most popular stress-free jobs that seniors take on to supplement the income they receive from the Social Security Administration:
Pet Sitting or Dog Walking
People with a love for animals find great joy in caring for others’ pets as a post-retirement low-stress job. Pet sitting or dog walking can be an excellent way to get out of the house and make some extra money. You can pick your own schedule and do as little or as much work as you like depending on how much social security you make.
A Tour Guide
For those who have a lot of knowledge and love to share it, being a part-time tour guide could be a fantastic way to make some extra money while indulging your unique interests. You have the opportunity to meet new people and stay active.
Paid Focus Groups
Companies use paid focus groups to test upcoming products, services, and issues with the general public. Basically, you meet up with other participants and share your opinions while being paid a fee for your time. Paid focus groups can get you out of the house, allowing you to socialize and make friends, all while being paid for sharing some thoughts about a new product.