In recent times, more than 40 banks in Hunan Province have introduced a new financial product called “Elderly Care Loan” to help customers who are facing issues such as interrupted payments and insufficient funds for lump-sum payments. The interest rates for these loans are higher than the current local mortgage rates.
According to a report from the official Beijing Business Daily’s account on July 8th, at least 40 banks have already launched the “Elderly Care Loan” product. This product targets two main groups: those who have never been covered by insurance but wish to make a lump sum payment for 15 years, and those who are already insured but want to make up for missed payments.
As reported by the financial magazine “Banking Financial Eye” on Phoenix Net, the “Elderly Care Loan” was launched by local banks in Hunan starting in May this year. The purpose of this loan, as stated by Xiangyin Rural Commercial Bank in their official promotion, is specifically designed for making payments towards elderly insurance, with funds going directly to individuals’ social security accounts.
Yuanjiang Rural Commercial Bank stated that the “Elderly Care Loan” is mainly intended to assist customers with payment interruptions, lump-sum payments, or upgrading payments for urban and rural residents’ elderly insurance when they lack funds.
Public data reveals that the requirements for applying for an “Elderly Care Loan” generally include local household registration, social security coverage, being close to turning 60 years old, and not having received national elderly insurance payments. Some rural commercial banks such as Yuanjiang, Shaodong, and Xiangtan have extended the application age limit to 65 years old. The loan amounts usually do not exceed 90,000 RMB, with a repayment period typically capped at 15 years.
Several banks have already announced the distribution of their first “Elderly Care Loans”. Linli Rural Commercial Bank announced that by June 9th, the balance of “Elderly Care Loans” had exceeded 30 million RMB. Hanshou Rural Commercial Bank also shared on its official WeChat account that the disbursement of “Elderly Care Loans” had exceeded 10 million RMB.
Promotional materials from various banks indicate that the annual interest rates for “Elderly Care Loans” generally range from 3.1% to 3.45%, and many specify that the loan interest rates are fixed without any fluctuations or additional fees. The Hunan Provincial official media “Hunan Daily” reported that after May 20th this year, the interest rates for first-home mortgages in Changsha had dropped to 3.05%, indicating that the interest rates for “Elderly Care Loans” are higher than those of first-home mortgages.
The Beijing Business Daily cited the explanation of a staff member from the Hunan Provincial Urban and Rural Residents’ Social Elderly Insurance Management Service Center, saying that “Elderly Care Loans” are not part of social insurance policies but are financial products launched by banks, operating separately from social security payments.
Due to the relatively advanced age of borrowers, over the extended 15-year loan period, banks may involve third-party insurance companies in cases where borrowers pass away before repaying the loan or face other exceptional circumstances. This involvement would be based on agreements between the banks and insurance companies, and not all products offer such guarantees. A customer manager at another rural commercial bank mentioned that in case of unforeseen circumstances like the borrower’s death, the remaining funds would be used to repay the loan directly, without involving their children. Xiangyin Rural Commercial Bank, Huarong Rural Commercial Bank, and Yuanjiang Rural Commercial Bank explicitly stated that if the borrower passes away during the loan term, the balance from the personal elderly insurance account would be used to repay the loan, relieving the children from taking on the debt.
However, some industry insiders have expressed concerns.
Lawyer Wang Deyue from Beijing Xunzhen Law Firm told the Beijing Business Daily that “Elderly Care Loans” also need to be alert to potential risks: firstly, risks associated with the characteristics of the borrower group, as the loans are primarily targeted at soon-to-retire individuals, and if a borrower passes away before fully repaying the loan, their children may face pressure to repay the debt. Secondly, there are limitations on the product’s applicability, as it currently only addresses issues of insufficient payment years, without benefiting economically disadvantaged elderly individuals with unstable income sources. Additionally, with loan terms spanning 10 to 15 years, disruptions in repayment due to the insured individual’s demise could lead to bad debt risks. Moreover, as elderly pension benefits are subject to policy adjustments that could disrupt the balance between loan repayment and returns if those policies change in the future.
Online opinions about “Elderly Care Loans” are mostly negative.
User “Liu Haiyun” questioned: “So, if older individuals can’t make money anymore, they go to the bank to borrow money for elderly care. If they can’t earn money, who will repay this loan?”
Another user, “Don’t Let Me Speak”, commented: “It’s obvious that banks are trying to profit from pension funds without taking on any losses.”
User “Yunxi Chunliang Jiu” calculated: “If you borrow 90,000 and pay 1,500 in interest per year, that amounts to 22,500 over 15 years. The bank will definitely profit without risks. You only earn an extra 6 RMB if you live past 75 years old. The problem is that the average life expectancy for men is only 67.7 years and for women, it’s 79 years.”
User “Scuba Diving Fish” asked: “Can you find a similar product in any country around the world?”