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Many senior citizens are living with large amounts of debt. The number of families with a head of household over the age of 55 with debt increased by 15 percentage points from 1992 to 2019, according to the Employee Benefit Research Institute. Most of this debt for older adults stems from housing, medical expenses, and credit cards.
Facing a high amount of debt can be overwhelming, especially if you’re retired and living on a fixed income. But the good news is that there are several potential strategies that could help you repay it more easily — for example, consolidating your debt might get you a lower monthly payment.
Debt consolidation for seniors
Debt consolidation is the process of taking out a new loan to pay off your debts. This leaves you with just one loan and monthly payment, which can greatly simplify your repayment.
Here’s a look at your options to consolidate:
|Debt consolidation loan||Balance transfer card||Home equity loan||Reverse mortgage|
|Type of loan||Installment loan||Credit||Installment loan||Mortgage loan|
|Interest rate||Fixed||Introductory 0% APR, Variable after that||Fixed||Fixed or variable|
|Credit score||670 or higher; some lenders may offer loans to those under 670||670 or higher||700, but some lenders will work with those under that||No minimum required|
Debt consolidation loan
A debt consolidation loan is a type of personal loan specifically used to consolidate debt. Depending on your credit, you might qualify for a lower interest rate on a debt consolidation loan compared to what you’re currently paying. This could save you money on interest and potentially help you pay off your loan faster.
Or you might choose to extend your repayment term to reduce your monthly payments and lessen the strain on your budget. However, this means you’ll pay more in interest over time.
If you decide to take out a personal loan for debt consolidation, be sure to consider as many lenders as possible to find the right loan for your needs.
|Lender||Fixed rates||Loan amounts||Min. credit score||Loan terms (years)|
|9.95% - 35.99% APR||$2,000 to $35,000**||550||2, 3, 4, 5*|
|11.79% - 20.84% APR||$10,000 to $50,000||730||3, 4, 5, 6|
|8.99% - 35.99% APR||$2,000 to $50,000||600||2, 3, 4, 5|
|7.99% - 24.99% APR||$2,500 to $40,000||660||3, 4, 5, 6, 7|
|11.72% - 24.67% APR||$3,000 to $40,000||640||2, 3, 4, 5|
|9.57% - 35.99% APR||$1,000 to $40,000||660||3, 5|
|7.99% - 35.99% APR||$2,000 to $36,500||660||2, 3, 4, 5, 6|
|7.49% - 25.49% APR with autopay||$5,000 to $100,000||700||2, 3, 4, 5, 6, 7
(up to 12 years for home improvement loans)
|18.0% - 35.99% APR||$1,500 to $20,000||None||2, 3, 4, 5|
|8.49% - 17.99% APR||$600 to $50,000 |
(depending on loan term)
|700||1, 2, 3, 4, 5|
|8.99% - 25.81% APR10||$5,000 to $100,000||Does not disclose||2, 3, 4, 5, 6, 7|
|11.69% - 35.99% APR7||$1,000 to $50,000||560||3, 5, or 7 years 8|
|8.49% - 35.99% APR||$1,000 to $50,000||600||2, 3, 4, 5, 6, 7|
|6.4% - 35.99% APR4||$1,000 to $50,0005||620||3 or 5 years4|
Home equity loan
If you’re a homeowner, you might be able to tap into your home’s equity with a home equity loan. Similar to a personal loan, a home equity loan is paid out as a lump sum that you can use how you wish — such as to consolidate your debt.
You’ll typically need to have at least 15% to 20% equity in your home as well as good credit to be eligible for this type of loan.
Learn More: What Is a Personal Loan?
Another type of home equity loan to consider for debt consolidation is a home equity line of credit (HELOC). Unlike a home equity loan, a HELOC is a type of revolving credit that gives you access to a credit line that you can repeatedly draw on and pay off — similar to a credit card.
You’ll typically need to have at least 15% to 25% equity in your home to be eligible for a HELOC, depending on the lender.
A reverse mortgage is another kind of loan where you borrow against the equity in your home. But unlike other types of home equity loans, you don’t make payments on a reverse mortgage to pay down your balance.
Instead, you’ll receive funds from the lender to use how you’d like — such as to consolidate debt — while your balance increases. The balance will become due if you die, sell the house, or move. Additionally, you must maintain the home and keep up with your property taxes to avoid foreclosure.
Check Out: Personal Loan vs. Credit Card
Balance transfer credit card
If you have high-interest credit card debt, a balance transfer card could be another option for consolidating it. This option lets you move your balance from one card to another. You’ll generally need good to excellent credit to qualify as well as to get a favorable interest rate.
Some balance transfer cards come with a 0% APR introductory period, which means you could avoid paying interest if you repay your balance before this period ends. However, if you can’t pay off your card in time, you could get stuck with some hefty interest charges.
Alternative options to get out of debt
There are also other strategies that could help you get out of debt, even if you have poor credit or are on a fixed income, such as:
If you’re looking to get out of debt, creating a budget — and sticking to it — is critical. By tracking your income and spending, you’ll be able to calculate how much you can afford to pay toward your debt each month.
This can also help to trim expenses to free up extra money to put toward your debt and speed up your repayment.
Learn More: How to Negotiate Credit Card Debt: A Guide
When it comes to the term “downsizing,” many of us usually think of moving into a smaller home to save money — which could be the right option in some cases. But it can also refer to cutting costs in other areas, such as:
- Financial support for adult children
- Major purchases
- Fees (such as late fees or overdraft fees)
If you’re overwhelmed and unable to pay your debt, filing for bankruptcy might be a good option. However, while bankruptcy can help you take control of your finances, it will also severely damage your credit — so it should only be used as a last resort.
There are two main types of bankruptcy available to individuals:
- Chapter 7: With this kind of bankruptcy, most kinds of unsecured debt can be discharged, such as credit cards and medical bills. To qualify for Chapter 7 bankruptcy, you must pass a means test to prove that you can’t afford to pay off your debts. If you’re eligible to file, you might be required to sell assets (if you have any) to repay your creditors. Keep in mind that this kind of bankruptcy will remain on your credit report for 10 years.
- Chapter 13: Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy doesn’t discharge your debt — instead, your debt will be reorganized, and you’ll make payments on a court-mandated repayment plan that typically lasts for three to five years. If you successfully complete your repayment, you could be allowed to keep all of your property. A Chapter 13 bankruptcy will stay on your credit report for seven years.
Check Out: Personal Loan Requirements
Additional resources for seniors
If you need additional help managing your debt, here are some resources to consider:
Government-funded programs and other resources
Depending on where you live, you might be able to take advantage of senior-specific programs available from local, state, or federal government agencies.
Credit counseling and debt management programs for seniors
Working with a credit counselor could be a great option for taking control of your debt as well as for other financial goals, such as creating a budget or planning for retirement.
Many credit counselors can also help you set up a debt management plan. Under this kind of plan, you’ll make monthly payments to the credit counseling agency, which will pay your creditors directly — usually for three to five years until your debt is fully repaid. If you sign up for this kind of plan, your creditors might also be willing to lower your payments or waive charges.
If you decide to get a personal loan for debt consolidation, remember to consider as many lenders as you can to find the right loan for your situation.
About Rates and Terms: Rates for personal loans provided by lenders on the Credible platform range between 5.20%-35.99% APR with terms from 12 to 144 months. Rates presented include lender discounts for enrolling in autopay and loyalty programs, where applicable. Actual rates may be different from the rates advertised and/or shown and will be based on the lender’s eligibility criteria, which include factors such as credit score, loan amount, loan term, credit usage and history, and vary based on loan purpose. The lowest rates available typically require excellent credit, and for some lenders, may be reserved for specific loan purposes and/or shorter loan terms. The origination fee charged by the lenders on our platform ranges from 0% to 12%. Each lender has their own qualification criteria with respect to their autopay and loyalty discounts (e.g., some lenders require the borrower to elect autopay prior to loan funding in order to qualify for the autopay discount). All rates are determined by the lender and must be agreed upon between the borrower and the borrower’s chosen lender. For a loan of $10,000 with a three year repayment period, an interest rate of 7.99%, a $350 origination fee and an APR of 11.51%, the borrower will receive $9,650 at the time of loan funding and will make 36 monthly payments of $313.32. Assuming all on-time payments, and full performance of all terms and conditions of the loan contract and any discount programs enrolled in included in the APR/interest rate throughout the life of the loan, the borrower will pay a total of $11,279.43. As of October 9, 2023, none of the personal loan lenders on our platform require a down payment nor do they charge any prepayment penalties.
Angela Brown has contributed to the reporting of this article