Published: November 20 2023
There is a growing trend of pensioners in Budapest taking out loans for home renovations. This is due to the fact that pension income is considered a stable and predictable source of income, making it easier for banks to approve loans for retirees. Additionally, many pensioners are also working part-time, which the banks also take into consideration when assessing loan applications.
Increasing number of pensioners working
According to the Central Statistical Office (KSH), there has been an increase in the number of pensioners taking on employment. In 2022, there were 110,000 pensioners working, and by April 2023, this number had risen to approximately 129,000. This accounts for 6.5% of the 65-74 age group. Many pensioners are forced to work due to insufficient pension income, while others choose to work even after reaching the retirement age.
Demand for loans among working pensioners
Working pensioners have a stable demand for bank loans, with most of them seeking loans without collateral and for short terms, typically up to 1-2 million Hungarian Forint (HUF). The majority of these loans are used for home renovations and upgrades, although some pensioners also use the funds for other purposes such as car repairs or replacing household appliances.
Requirements for loan approval
Pension income itself is considered a reliable source for loan approval, and if a pensioner also has additional income from employment, most banks will accept it as well. However, banks typically require a minimum monthly net income of 125,000-150,000 HUF for loan eligibility. This poses a challenge for many pensioners, as the latest data from KSH shows that around 660,000 pensioners receive less than 140,000 HUF in pension benefits. Only 35,000 pensioners receive a pension exceeding half a million HUF.
Loan repayment and eligibility
The minimum income requirement is just one aspect of loan eligibility, as the loan amount that can be approved depends on the pension income and any additional income. The debt-to-income ratio restricts the maximum percentage of the net income that can be used for loan repayment. For example, if the net income is below 600,000 HUF, only up to 50% can be allocated for loan repayment, while for incomes above 600,000 HUF, up to 60% can be allocated. It is important to note that most banks have an upper age limit for loan approval, typically around 70-72 years old. However, there are exceptions where loans can be approved for individuals up to 66 years old without considering their age at maturity. In some cases, a younger co-applicant may be required if the borrower's age exceeds the bank's upper age limit.
Expected monthly repayments for pensioners
Most pensioners opt for small loan amounts, typically around 1-2 million HUF, and due to the critical upper age limit for loan approval, the loan terms are relatively short, usually 2-3 years. Using the Bankmonitor loan calculator, a loan of 1 million HUF with no collateral and a monthly income of 200,000 HUF (which can be from a pension or a combination of pension and additional income) would result in a monthly repayment of approximately 36,000 HUF for a 3-year term. For a loan amount of 2 million HUF, the monthly repayment would be around 68,000 HUF.
Questions & Answers
Why are more and more pensioners in Budapest taking out loans for home renovations? Many pensioners in Budapest are taking out loans for home renovations because their pensions are stable and easily verifiable sources of income, making them eligible for loans. Additionally, some pensioners also have additional income from working, which banks take into consideration when approving loans.
Are pensioners eligible for loans in Budapest? Yes, pensioners in Budapest are eligible for loans. Their pensions are considered a well-creditable and predictable source of income. If a pensioner also has a full-time income, most banks accept this as well.
What are the requirements for obtaining a loan as a pensioner in Budapest? Banks typically require a minimum monthly income of 125,000-150,000 HUF for loan approval. However, many pensioners receive less than this amount in their pensions, making them ineligible for loans without additional income. It is important to note that only 35,000 pensioners have a pension exceeding 500,000 HUF. The loan amount that can be obtained depends on the pension and any additional income.
What kind of loans do pensioners in Budapest typically take out? Pensioners in Budapest typically take out small loans, usually ranging from 1-2 million HUF. These loans are commonly used for home renovations and improvements. However, some pensioners also use the loans for other purposes such as repairing their cars or replacing older household appliances.
What is the average monthly loan repayment for pensioners in Budapest? The average monthly loan repayment for pensioners in Budapest depends on the loan amount and the repayment period. For a loan of 1 million HUF, with a repayment period of 3 years and a monthly income of 200,000 HUF, the monthly repayment is approximately 36,000 HUF. For a loan of 2 million HUF, the estimated monthly repayment is around 68,000 HUF.
Are there age restrictions for obtaining loans as a pensioner in Budapest? Most banks in Budapest have age restrictions for loan approval. Typically, the borrower should not exceed the age of 70-72 during the loan repayment period. However, there are some banks that allow loans up to the age of 66, without considering the borrower's age at the end of the loan term. There are also cases where a bank does not establish an upper age limit but limits the maximum loan amount based on the borrower's age.
Is it possible to have a younger co-borrower for loan approval as a pensioner in Budapest? Yes, if the borrower exceeds the maximum age limit set by the bank, it is possible to have a younger co-borrower involved in the loan application.
Please note that this FAQ article was created based on the provided source article.