Debt relief can be hard to attain for many people, but especially so if you’re a senior. You might have a fixed income such as social security or a pension plan, limiting your ability to get ahead financially. And when credit card debt starts building, the high-interest rates and over the credit limit fees can make it feel impossible to pay your debt back down.
Are you a senior citizen who has been struggling with unsecured debt such as credit cards or medical bills lately? The good news is, there are a wide array of options for getting debt relief. Keep reading to learn which methods for becoming debt-free might work for your circumstances.
OPTIONS FOR GETTING DEBT RELIEF
If you’re in your golden age and you’re still dealing with debts, there are debt relief programs to help you become financially worry-free. Call us today!
Home Equity Line Of Credit (HELOC)
If you’re a senior who owns a home, one potential way to get relief from your high-interest and high payment debt is tapping into the equity in your home. A popular strategy for leveraging the equity in your home for debt relief is taking out a home equity line of credit. Technically, this is yet another form of debt, but the benefit is, you’ll enjoy a far lower interest rate.
A home equity line of credit works much like a normal cash-out refinance. However, there are some key differences that make a home equity line of credit a more attractive alternative. For starters, a HELOC can be a second mortgage, meaning the bank will only be able to take your property for non-payment if your first mortgage lender gives up their lienholder position. Essentially, it’s a lower-risk way to tap the equity in your home than refinancing a first mortgage and taking cash out at the closing.
Another benefit of a home equity line of credit is that the loan can be reused over and over, unlike a straight cash-out refinance that only gives you access to equity once. With a HELOC, you’ll be able to re-use the available credit on the line once you pay down the loan, similar to a credit card. The difference is, unlike a credit card, you can sometimes write off the loan interest on your taxes each year, reducing your net debt expenses.
Another debt relief option for seniors who own a home but don’t have a loan on it currently is a reverse mortgage. Similar to a home equity line of credit, a reverse mortgage enables you to access the equity in your home without selling it. Much like a cash-out refinance, you get cash for the equity in your home, but rather than a lump-sum payment at the closing, you’ll be paid a regular payment every month.
This regular monthly payment can be used to pay down your debts steadily until you’re debt-free. In the meantime, you’ll enjoy far less stress about being able to pay your monthly debt obligations.
One downside to a reverse mortgage is that instead of your balance decreasing every month, it increases. With a reverse mortgage, the bank pays you every month, increasing the amount they’ll be paid in the event you want to sell the home.
Eventually, the bank could wind up getting every penny that your home sells for if you choose to move out at some point. This could cause a major wrinkle in your plans to pass down the family home to your loved ones. Reverse mortgages can provide tremendous relief, but their nature makes it wise to choose this option with great caution.
Cash In Low-Yield Investments
If you happen to have low-yield investments such as shares in a bond fund backed by government paper, it might be better to cash those in to pay down your debts. If you’re struggling to pay for essentials each month, keeping your money tied up with investments that pay very little returns isn’t the best strategy. It’s always better to pay off your high-interest debts before allocating your money to safe, low-yield investments like CDs and bonds. When your bills are too much to handle each month, it’s time to cash in.
For seniors with good credit, it may be possible to simply transfer your growing credit card debt to a new card with a low-interest introductory period. Ideally, this card will also feature an interest rate after the intro period that is much lower than what you’re currently paying. Be sure to check into whether or not the lender charges a balance transfer fee, which can sometimes be 3-5% of the balance, reducing your overall savings. If your debt struggles are only temporary, and you’re expecting more money to flow in to pay off your debt, this could be a solid way to get debt relief when you need it.
Credit Counseling Program
If your debt is limited to mostly credit cards and you haven’t fallen behind on payments, an alternative to opening a new account for a balance transfer is credit counseling. This method involves negotiating new repayment terms with your creditors but usually doesn’t result in a significant balance reduction.
Debt Settlement Program
When you’re unlikely to have an increase in income anytime soon and you’re unable to pay your bills, a debt settlement program could provide the relief you need. With debt settlement, you negotiate with your lenders to pay a lump-sum payment or series of payments in return for a reduction in your current balance owed. Often, unsecured debt rises because of excessive fees and penalties, along with high-interest rates. Most banks would rather get something than nothing, so a senior with little chance of making more money has a good chance of settling their debt.
Are You A Senior Who Needs Help With Debt Relief?
If you’re a senior who’s struggling with debt, remain hopeful, because Alleviate Financial has debt experts standing by who can help. Our seasoned debt settlement negotiators are familiar with creditors and what it takes to get them to agree to settle a debt. Give us a call today to learn more about how you can become debt-free without putting your home at risk or taking on more debt.