When you are working, it is relatively easier to raise short term funds in times of need. If nothing else, you can apply for a personal loan. On the other hand, once you have retired, your ability to take a loan from the formal finance sector goes down. However, the need for a loan does not go away even after you retire. There are events which might force you to take a loan. If you are retired, what are your loan options? Not many. You can go for a gold loan. If receive pension, you can also apply for a pension loan.
We had discussed a pension loan product from the State Bank of India in an earlier post. The nature of the pension loan products is such that you must be drawing pension from the same bank. Therefore, if you draw your pension through another bank, you will have to check pension loan amount from that bank.
In this post, we will discuss a pension loan product from the Punjab National Bank (PNB).
PNB Pension Loan: Salient Features
- You must be drawing pension from one of the PNB branches
- Minimum Loan Amount: Rs 25,000
- Maximum Loan Amount: Depends on your age
- Age up to 70 years: Rs 10 lacs. Additional cap of 18 X Monthly pension, 20 X monthly pension for defence pensioners
- Age between 70 and 75 years: Rs 7.5 lacs. Additional cap of 18 X Monthly pension, 20 X monthly pension for defence pensioners
- Age above 75 years: 5 lacs. Additional cap of 12 X monthly pension
- Loan Tenure: 24 months for pensioners above 75 years, 60 months for others
- No tangible security required
|PNB Pension Loan||Minimum Loan Amount||Maximum Loan Amount||Additional Ceiling Amount||Loan Tenure (Months)|
|Less than 70 years||25,000||10 lacs||18 months pension|
(20 X monthly pension for defence pensioners)
|Between 70 and 75 years||7.5 lacs|
|Above 75 years||5 lacs||24|
There are multiple caps on maximum loan amount.
- An absolute cap depending on age (discussed above)
- 18 times monthly pension (20 times for defence pensioners)
- The loan amount shall be such that the EMI does not exceed 50% of the net monthly pension. SBI pension loan has a similar restriction
Let’s understand with the help of an example.
Your age is 65 years. Therefore, the absolute cap is Rs 10 lacs. Your monthly pension is Rs 20,000. This means your pension loan EMI cannot exceed Rs 10,000 per month. If the loan tenure is 5 years, this implies that the maximum loan amount can be only Rs 4.7 lacs. i.e., EMI for a loan of Rs 4.7 lacs at 10% p.a. for 5 years will be Rs 10,000. Since the maximum EMI is Rs 10,000, the maximum loan amount automatically gets capped at Rs 4.7 lacs. You can try out Loan Calculator to assess maximum loan amount for your case. However, you may not get even Rs 4.7 lacs. As mentioned earlier, the loan amount is also capped at 18 times your monthly pension. Therefore, the maximum loan amount in this will be 18 X 20,000 = 3.6 lacs (and not Rs 4.7 lacs). For a loan of Rs 3.6 lacs for 5 years at 10% p.a., the loan EMI will be Rs 7,649.
Do You Need to Provide Any Security?
There is no tangible security required. However, the guarantee for spouse (eligible for family pension) is required. Alternatively, guarantee from earning children (preferably Government employees) will also do. You can also provide a third-party guarantee for the loan amount. The requirements are quite similar to those for SBI pension loan.
What Are Rates of Interest and Other Charges for PNB Pension Loan?
Please understand interest rate and charges can change over a period of time. As on December 19, 2018, the interest rate for pension loan is 1-year MCLR + 2.8%. 1-year MCLR is 8.5% p.a. Therefore, the effective rate of interest will be 11.3% p.a. There is no processing fee. Rs 500 will be charged towards documentation charges. You can check the latest interest rate and charges on PNB website.
Points to Note
- There was no mention of loan for family pensioners on PNB website. Under SBI loan for pensioners, even a family pensioner could get a loan.
- SBI pension loan limited eligibility to central/state Government or Defence pensioners. PNB website mentions all types of pensioners drawing pension through its branches. If you are receiving pension from a private enterprise, you may be able to get pension loan from PNB. I am not very sure though.
- Prepayment charges, if any, have not been provided on PNB website.
- Though it is not mentioned on the bank website, you may be asked to provide a guarantee that you will not change bank for receipt of pension during the tenure of the loan.