Debt Relief for Senior Citizens: Debt Consolidation

The main source of earnings for the majority of older people include retirement savings as well as Social Security however, financial stability is all about costs. Seniors whose income is being sucked up by debt are more likely to live longer than their debt savings.

There is a way to right and find the relief of debt for seniors however. Setting up a budget that is realistic and making adjustments to your lifestyle can be beneficial and so can debt consolidation for seniors. In the most extreme circumstances bankruptcy might be the best option.

Senior citizens who are in debt have a wealth of options available to them From non-profit credit counseling to government-funded programs.

Budgeting

Social Security checks make up 33% of the income in the average for older beneficiaries, as per the Social Security Administration. The average monthly check is less than $1,544which is the equivalent of an annual salary of $18,528.

Because extending your funds comes down to two major components (income as well as expenses) Senior citizens who have debt must be sure to give their spending the time they deserve. Start by keeping track of your expenditure to have the most precise idea of where your money is going. When you’re not paying off debt How are you going to tackle the essential expenses of living?

To make a budget that is effective start by jotting down the total amount of your earnings and expenses and then create an action plan for your finances that you feel comfortable with. If debt-related payments are a major factor in tipping the scales to the point that you are spending more than you earn it may be a good idea to look into debt relief agencies for senior citizens (more on this later).

If debt is a major factor in the cashflow of your business, taking part-time jobs If it’s feasible, is a way to more money.

Refraining from collecting Social Security can also help increase your financial chances. Waiting until you reach 67, which is considered to be full retirement age, can mean getting significantly more than if you’d started taking Social Security benefits at the age of 62.

Downsizing

Revisions to your budget can expose areas of your financial situation that require some fine-tuning. Are you spending more than your budget? If, for instance, you’re spending $100 per week eating out getting into the routine of planning your meals and grocery shopping could easily reduce your expenses.

Transportation

If you’re struggling with the cost of a car loan either selling or buying an earlier model abstaining from a car and relying on public transport could be a more economical option. This is because the U.S. Department of Energy is among the main sponsors for the Ride or Drive calculator, which assists people in determining the possibility that ride-sharing applications such as Uber and Lyft are more affordable than owning a vehicle. In the end, removing your car’s monthly cost, insurance gas, maintenance and fuel costs in one fell swoop can be a great way to reduce your expenses.

Housing

When seniors are told about “downsizing,” housing is usually the first thing that will be thought of. It can be a challenge for a Certified Financial Planner Jill Schlesinger tells LendingTree: “It often requires making a huge change to your lifestyle” during a time you’re likely to want to relax and take it easy. Additionally, selling your large house and moving into one-bedroom apartments won’t always cost less.

“Most have condo association fees, and the ones that have all the nice bells and whistles and are much better to age in actually cost a lot of money,” says Schlesinger noting that downsizing can also mean the removal of the people you love and your caretakers.

Strategies for downsizing

Schlesinger suggests beginning with smaller lifestyle adjustments. Making sure you are on top of the debt payment could require taking just one holiday each calendar instead of 3 or cutting back on how much financial assistance you offer to your adult children. Examine your expenses and consider ways to save money for debt.

Consolidation of debt for senior citizens

There are many easy, DIY methods to consolidate debt. These can ultimately assist you in becoming debt-free sooner and save you cash over the long run. Many senior citizens do this through leveraging their home.

Reverse mortgage

To be eligible for a reverse loan, you must be at minimum 62 years old with a significant equity stake in your home, and the ability to pay with insurance premiums and taxes in the course of loan.

Consider a reverse mortgage as an equity loan for your home which you do not have to repay every month. Instead, the loan becomes due upon the death of the last borrower to be surviving or the time that person decides to sell the property or ceases making it their principal home. If you die, and your heirs do not have enough money to pay this loan, they may take the property off the market and utilize the proceeds to pay off the reverse mortgage. They won’t be required to pay the extra amount when the loan balance is higher than the value of the home.

Be cautious when you choose to get reverse mortgages, because they are a risky product for senior citizens and are vulnerable to abuse.

Home equity loan

Home equity loans lays out an amount of cash in one lump which you pay back with equal payments. Similar to the home equity line of credit (HELOC) It can be a rotating line credit that you start repaying when you’ve completed borrowing. Both let you utilize the equity in your house to earn the cash.

To receive the best interest rate on your home mortgage, the typically must be less than 85% of the value of your home. The ratio of your debt to income (the proportion of your income which is currently used for the payment of debt) generally shouldn’t exceed 45percent.

Personal loan

If you’re not able to accumulate enough capital to finance a loan against your home A personal loan might be the solution. It’s when the lender provides you with one-time loans which you must repay with equal payments over a specific time frame at the fixed rate of interest. If the rate is less than the amount you’re currently paying for your current credit, you’ll end up saving cash in the end. Also, you’ll have the benefit of making a single monthly payment.

Transfer of balance credit card

This happens when you take out the new credit card with the lowest or zero initial interest rate to pay off existing credit card. In order for it to be financially viable you’ll need make sure to repay the balance transfer card before the promotional period is over in order to avoid being charged interest.

Seniors are able to get debt forgiveness through bankruptcy

Bankruptcy is usually associated negative associations and stigmas however for senior citizens who are in debt, it’s often the only choice.

Although filing for bankruptcy can affect the financing options in the future, this might not be as significant as a problem for someone who is in their senior years. A fresh start in your financial life as well as being able keep your retirement and home accounts secure, could be the best choice for people who are already in debt.

There are two kinds of bankruptcy you can think about. One or the other may allow senior citizens to get debt relief however, it comes at a price.

Chapter 7 bankruptcy

Chapter 7 allows you to liquidate some of your assets to pay off your obligations. In most situations the debts you owe will be discharged. However the child support, alimony, and the majority of student loans as well as other debts, would likely not be discharged.

Your credit score could decline in the short-term The bankruptcy will appear upon the credit report for a period of 10 years, however you will nevertheless build your credit.

In addition, while certain assets of yours are available for sale but your retirement accounts aren’t at limits. Also, it’s likely that you’ll be able to keep the majority of the equity in your home.

Chapter 13 bankruptcy

Chapter 13 puts a payment program in place which typically is three years long, following which the remaining debts are removed. The good thing about this is that your possessions are secured.

The type of bankruptcy also stops foreclosure processes. This alone could aid in saving a house that is in danger of going into foreclosure. The only downside is that bankruptcy can remain in the credit record for 7 to 10 years.

About Francis Harris

Check Also

Auto loans are the fastest growing category of non-home debt. Here are 3 tips to stay ahead of your payments

Image source: Getty Images Do you owe a lot of money on your car? Here’s …