According to the Employee Benefit Research Institute, debt among American families headed by someone 55 or older had increased from 53.8% in 1992 to 65.4% in 2013. Retirees have also reported that they incurred the following kinds of debt: credit card (27% of retirees), mortgage (23%), home equity line or credit (17%), or car loans (17%). As seniors turn to their fixed income, such as pension and social security, yet cost of living rises, they find themselves falling behind on payments.
This scenario is unfortunate as the older members of our society would want to spend their twilight years in relative comfort after long careers. Instead, a lot of them are forced to work long after their primes just to make ends meet. In some cases, it becomes a matter of staying active until they’re physically incapable of productivity.
Fortunately, seniors who have incurred debt have options other than toiling away until their bodies give out on them. By seeking the right kind of help and talking to the right people, debt can be reduced to much more manageable levels. Here are some programs that have helped Americans deal with financial liabilities in their advanced ages:
- Debt negotiation: Debt negotiation refers to the attempts at settling a debt by a debtor who enlists the help of a third party firm to negotiate on his behalf. The firm will communicate to the creditor that the senior citizen is not in good financial shape and only has a few working years left in him or her.
- Debt consolidation: Debt consolidation assumes that there are several debts that the senior needs to pay. By offering a new loan to pay off these debts, debt consolidation groups such as banks and credit unions combine the existing debts into one, reducing the interest the senior is required to pay.
- Debt management: Debt management is another option for seniors who are dealing with financial adversity. A debt management adviser is a professional who is tasked to recommend a smart and doable strategy to repay the debt. This financial expert will aid in negotiating a new payment scheme with the creditors, relieving financial burdens for the client who may be stretching his resources thin.
- Credit counseling: Getting advice from a credit counselor can assist a senior citizen in coming up with a plan to pay off the debt. The credit counselor will evaluate the senior’s current financial situation and formulate a strategy that suits his fixed income and lifestyle.
In order to pay this in one go, the senior agrees to put away some money by depositing a fixed amount into an account each month. When he has saved enough to pay the lump sum in this account, the debt settlement company contacts the lender and speaks on the debtor’s behalf. Once the creditor agrees to the terms, the original amount the senior owes is reduced and the debt will be satisfied.
This type of debt settlement is best for seniors who have serious debt (at least $10,000 or more) and are unable to meet their monthly payments, making the balance owed grow out of proportion.
Although the various debts are consolidated into one account and are paid with a single loan, the amount that is owed to the creditors remains unchanged. Also, not everyone can enroll in this program. If the account has already defaulted or the senior does not meet a minimum credit score, then he will not be able to use this option. Other factors that could affect debt consolidation approval are monthly income, home ownership and the types of loans you initially took out.
If eligible, however, the senior will enjoy the ease and convenience of taking care of just one loan with friendlier interest rates. In some cases, the monthly payments are reduced, though the debt will stay in the books longer than the original ones were supposed to.
Unlike debt consolidation where one is still required to pay the same balances, a debt management planner can ask the lender to reduce interest fees, or even lower the monthly payments. Despite these savings, the senior is expected to pay the debt management agency a minimal fee for their services. This is usually $10 to $15 per month for each debt account enrolled.
This solution is best for seniors who need a lower interest rate monthly and can stick with the repayment program for the full five years.
Aside from this, the counselor can also educate the senior in handling his finances and prevent getting into debt again. He can propose to the senior a debt relief program that will fit his needs and preferences. There are several credit counseling services that are free, but there are also some that are for profit.
Retirement for seniors should be a time of relaxation. They should be free from stress associated with collection agencies and credit card companies. One of the ways they can do this is through the debt settlement solutions above. If you’re near the end of your career but are still dealing with heavy financial responsibilities, consider seeking help today.
To learn more about debt relief solutions and how to start living with financial freedom, contact CreditAssociates for a free consultation or use our Savings Estimator to see how much you could save.