Retirees' Loans Repayment Period Extended to Age 75
- Banks have opened their credit portfolios to expand the financing base for senior citizens
- The personal loans market is shedding its excessive reluctance to lend to older adults
- Specialized banking offers and products for seniors cover home renovation, healthcare, and education
- The average age of seniors in Kuwait has risen to 78 years, encouraging banks to extend loan tenors
- Lending banks prefer to secure life insurance for the client; if refused, they rely on the presence of assets or cash flows
You might not be surprised to learn that banks are fiercely competing to attract young people financially, offering them specialized products, services, and banking benefits that sometimes even include loans covering the cost of a “wedding party,” specifically for those with promising career and financial prospects, given their classification as an elite segment with whom long-term, multi-product banking relationships can be built.
But what if you learned that the banks’ growing race for customers is not limited to “twentysomethings” alone, but extends to senior citizens, even those in their mid-seventies, and that this includes opportunities for consumer financing and installment loans (housing)?
As part of their expansion strategies in the personal loans sector, encompassing both consumer and housing segments, and with appropriate market shares aligned with the ambitious plans led by some local banks amid the credit slowdown recorded since the outbreak of the open conflict between the US and Iran on February 28, some banks have opened their credit portfolios with great appetite to expand their base of retired customers, particularly those whose ages are in their late sixties, who previously faced excessive banking sensitivity when applying for new loans.
In this regard, it has been noted that the personal loans market for retirees has been witnessing continuous growth for some time, driven by special offers and banking products tailored to them, fueled by statistics regarding seniors in the country showing an increase in life expectancy in Kuwait in recent years due to the general development of healthcare services. Despite this, some studies rank the country third in the Arab world and 64th globally in terms of the high average age of its citizens, at 78 years for females and 76 for males, according to results of a banking study conducted on this matter.
In this regard, some banks have raised the maximum age limit for repayment of loans for eligible retirees by 24 months, extending the total permissible age of the client until the final installment to 75 years. This aims to expand the customer base included in this segment. This age-based expansion includes granting consumer loans to eligible individuals up to 25,000 Kuwaiti dinars, alongside housing financing up to 70,000 dinars, provided that the client meets regulatory conditions and complies with the bank’s credit policy risk parameters.
According to instructions from the Central Bank of Kuwait, the monthly installment for a retired customer must not exceed 30% of their net salary. For an employee currently working, this percentage rises to 40%. This means allowing a retired customer who is in their early sixties to obtain a housing loan with a repayment tenor of up to 15 years. If the customer is in their early seventies, they can obtain a consumer or housing loan, or both, provided that the total repayment period does not exceed five years.
The most prominent conditions governing this matter revolve around a set of key determinants. First, the applicant must be a Kuwaiti national, as this financing product is exclusively reserved for citizens and does not extend to non-Kuwaitis of the same age group. Additional requirements include meeting the Central Bank’s criteria, having a pension salary suitable for deductions not exceeding 30% of the total amount, being in good health, possessing a favorable credit rating, and maintaining a stable salary account that is not known for frequent transfers between banks, thereby disregarding the lending bank’s right to receive the salary. It is also preferable for the applicant to agree to life insurance coverage.
Banks are committed to offering life insurance to all borrowing clients to protect them and their loans from the risk of erosion due to death before the debt is fully repaid. However, some clients refuse life insurance for personal reasons. Nevertheless, this refusal does not deter enthusiastic banks from financing eligible retirees, provided the client has assets or other income streams that can be pursued in the event of death. Generally, retirees are attractive to banks, as indicators show that this segment typically demonstrates a good credit history and an acceptable default rate from both regulatory and banking perspectives. This is further supported by the stability of their salary inflows. However, there are limited risks associated with the absence of restrictions preventing retirees from transferring their salary accounts from the lending bank to another, which could weaken the original bank’s ability to deduct installments and adhere to credit limits recorded in the credit information network.
When asked about the most common areas of borrowing for retirees aged 65 and above, banking officials, who are increasingly granting loans to this segment, responded that their spending needs are comprehensive, covering both the consumer and housing sectors.
They added that the spending of the largest portion of this group is concentrated on home renovation, contributing to the construction of a family home or a home for a family member, as well as consumer sectors, primarily education and healthcare, and occasionally travel, or even settling accumulated financial obligations.
