YOU have a whiter than white credit history, you own your own home and have a highly secure income, yet applications for an unsecured personal loan are declined. This is the frustrating predicament that retired borrowers are facing with a number of lenders.

Unsecured personal loan lenders such as Lombard Direct will not lend to anyone who has passed their 66th birthday, regardless of their credit history and ability to meet repayments.

Age Concern, the charity for the elderly, says that there is evidence of discrimination by financial services companies. It says older people are often refused finance after a certain age, in part because the Consumer Credit Act 1974 does not prevent lenders discriminating on age grounds.

Gordon Lishman, director general of Age Concern, says: “Some older people are turned down for financial products or services such as loans purely because of crude assumptions about their age.”

The good news is that times are changing and even those lenders currently applying blanket bans to customers over a certain age are prepared to think again. Lombard Direct told Times Money that it is in the process of reviewing its policy towards older loan applicants.

As it stands, applicants can request a Lombard Direct loan until their 66th birthday, but it must be paid off by the age of 70. The advertised rate is 6.7 per cent for loans between £5,000 and £15,000, although this rate is rarely offered. Most applicants receive a rate of 8.5 per cent.

Those who think that they will have better luck with their bank should remember that a set repayment age for retired people is often stipulated. Lloyds TSB insists that personal loans are repaid by the time customers reach the age of 75.

Do not fall into the trap of thinking that the only way to obtain finance is by taking out expensive loans advertised on television, which are aimed specifically at retired people who have been turned down for unsecured credit.

Not all lenders penalise the applications of older borrowers. Tesco Personal Finance has a positive view of silver applicants, rather than turning them away on the basis that their income is pension and not earnings-based.

The financial services arm of the UK’s leading supermarket makes favourable comparisons between people with a predictable income from a final-salary pension and the more sporadic cashflow of new graduates. Stuart Neill, a spokesman for Tesco, says: “We consider retired people a very good risk as pension income can be highly stable.”

Sainsbury’s Bank and Nationwide also do not apply upper age limits: Sainsbury’s says its typical rate is 7.2 per cent, while Nationwide quotes 7.9 per cent for loans of £1,000 to £20,000, to be repaid over a period of seven years.

Liverpool Victoria does not impose an age ban. But it says that if a loan is not repaid before a borrower’s 80th birthday it will be individually underwritten. It says that this does not affect the rate.

Anyone considering a personal loan later in life should think about what will happen in the event of death before the repayments are completed. Does life insurance cover the loan or will a borrower’s family deduct the debts from his or her estate? Loan protection insurance,which covers repayments in circumstances when the borrower is unable to do so, is not always available to retired applicants, even if the loan itself has been approved. While both Halifax and Alliance & Leicester will lend to those who are aged above 65, protection insurance is not available for their loans.

Jason Clarke, a spokesman for Halifax, says: “There is no age limit placed upon unsecured loan applications. The criteria is that borrowers need to be able to repay. While there is no requirement to take out repayment insurance, customers must be under 65 at the end of the loan to qualify for this protection.”

Although increasing numbers of reputable lenders are putting a stop to age discrimination for unsecured personal loans, obstacles still crop up if borrowers need to fund home improvements or a new car.

Nick Bamford, of Informed Choice, an independent financial adviser (IFA), says: “Think very carefully before borrowing at all — what are you borrowing for and what will be the total cost? Remember that this money must be repaid by you or your family.

“Also, look at all the options — it may be cheaper or more suitable to look at remortgaging to withdraw a lump sum from the equity in your home. An equity release plan may be appropriate.”

If a personal loan is still the best option, but a prospective borrower is finding it difficult to gain approval, he or she could consider turning to their bank. However, it could be an expensive method of unsecured borrowing.

David Scott, of Alan Steel Asset Management, an IFA, says: “You could gather evidence of an ability to meet repayments and ask an account manager about a ‘personal term loan’. Rates are worked out case by case and can be higher than standard personal loans. But it is an option.”

LINKS Age Concern: 0800 009966, www.ageconcern.org.uk; Lombard Direct: 0800 215000, www.lombarddirect.com; Tesco Personal Finance: 0845-600 6016, www.tesco.com;Sainsburys Bank: 0800-096 0541, www.sainsburysbank.co.uk; Nationwide BS: 080