The population of 62+ individuals is the largest growing segment of contemporary society. Most seniors have either retired or are looking toward retirement within a few years. With retirement comes a fixed income, from social security and pensions, and the majority of seniors live on these two sources. As the cost of living rises, retirement income may not always rise accordingly, and seniors may begin to use credit cards to offset the difference. It is therefore easy to accumulate credit card debt that is difficult to pay back.
Options for Senior Citizens
1. Credit card debt consolidation is a means of rolling all credit card debt into one larger loan, the payment for which is lower than the total payments for the credit cards. This is an appropriate solution if the senior is willing to cut up his/her credit cards, keeping one for emergencies only, and if the senior is actually able to live on the retirement income coming in. Along with consolidation, there should be credit counseling and assistance with the development of a budget, so that the same situation does not arise again. There are numerous debt consolidation professionals who provide these services, but it is important to do some research and certainly check references. The Better Business Bureau in any locale is a good start point when checking on the reputation of a debt consolidation firm.
2. A senior in good health may consider taking a part-time in order to pay off the credit card debt. Many businesses and organizations favor hiring seniors, as they tend to be more responsible and dedicated. Before selecting this option, it would be wise to check with Social Security to understand what income restrictions there may be, so that the monthly benefit does not get reduced. In most instances, seniors are able to earn at least $12600.00, without any penalty, prior to age 70 and as much as they wish upon reaching 70.
3. Using one’s home equity is a rather unique benefit for seniors, as many own their homes free and clear. Taking out a home equity loan makes sense if the payment is lower than the credit card debt payments, and the payment can be afforded. Again, this option will require the cutting up of credit cards, so that the debt situation does not recur.
4. A more recent and increasingly popular option is the reverse mortgage. This option allows a senior to access the equity in his/her home without having to make any monthly payments. The basic idea is that a lending institution will give the senior a mortgage based upon his/her age and the appraised value of the home. The older a person is, the more equity given. The loan on the home is not due and payable until the borrower dies or moves out of the home for a period of 12 months. Because most of these loans carry mortgage insurance, the borrower can be comfortable in the knowledge that children will not be strapped with the loan payoff. There are many options for taking this money as well, to include a monthly stipend, a one-time total cash payment, or an equity line of credit, which earns interest and allows the senior to access his/her money as necessary. The beauty of this option is that the senior can eliminate all credit card debt at once and probably still have additional cash to access for emergencies. If there is already a home equity loan or a mortgage on the property, but enough equity left, the other loan or mortgage will be paid off before the borrower gets what is left. This can lower overall monthly debt as well.
One Final Piece of Advice
Often, seniors face home repairs, which strap their monthly budget. When they cannot afford the repairs, they place the cost on credit cards, accumulating more debt than they can comfortably afford. Most cities offer grants for repairs and improvements, and the money does not have to be paid back so long as the individual lives in the home for an additional five years. These programs can be truly beneficial to a senior living on a fixed income.