Paying off debt can be a challenge for retirees, but here’s how to get it done.
Most important points:
- A new survey finds that most retirees have credit card debt.
- Getting a part-time job or, if you own a home, tapping into your equity are ways to pay off debt faster.
- Consolidating debt with a balance transfer credit card or personal loan can also be options.
When we think of consumer debt, it’s easy to assume that younger people are the source. But actually, many older Americans also carry their share of debt. A recent survey by Clever found that 76% of retired Americans have some form of debt. And 67% of retirees have an unpaid credit card balance.
However, the problem with credit card debt is that it can be costly. And since credit card interest can be variable, it’s easy to get stuck in a cycle where that debt becomes increasingly difficult to pay off.
This is especially true for retirees with a fixed income. If you’re largely limited to Social Security as your source of income, you may not have much room in your budget to pay off credit card debt faster than your current rate. But if you’re eager to get rid of that debt for good, here are three steps worth taking.
1. Find part-time work
Many seniors resign themselves to living on social benefits. But these days, it might be easier than you might think to get a part-time job that could boost your income and give you money to pay off your credit card debt.
Many employers have become accustomed to remote working due to the pandemic and are now more flexible. As a result, you may be able to consult from afar in your former field and increase your earnings. For example, if you were a former number cruncher, you might be able to handle some remote accounting tasks or even data entry.
2. Consolidate Your Debt Through a Balance Transfer or Personal Loan
If you’ve managed to keep your credit score in good shape through retirement, there may be a way to make your credit card debt more affordable, which can also make it easier to pay off. If you move your funds to a new credit card with a lower interest rate — or better yet, a 0% introductory rate — it may be easier to get ahead of that debt and get rid of it for good.
Another option is to apply for a personal loan. You generally pay less interest on one of these loans than what your credit cards charge you. So if you can’t transfer a balance or don’t want to go that way, a personal loan is a reasonable alternative.
3. Tap Equity to Make Your Debt More Affordable
If you are retired and own a home, chances are you have a decent amount of equity. This is especially true at the moment, as house prices are rising on a national scale.
Just as making a balance transfer or taking out a personal loan can make your credit card debt more affordable to pay off, so can taking out a home equity loan or line of credit (HELOC). If you can borrow against your home, you can pay off your credit cards and then repay your mortgage loan or HELOC at a lower interest rate.
That said, you should be careful about tracking your home equity loan or HELOC payments. If you fall too far behind, you risk losing your home. But these are options worth pursuing if you want to pay off your credit cards and not take the risks of getting a reverse mortgage.
The fact that so many retirees have credit card debt is not surprising. But if you’re in that boat, your best bet is to pay off that debt ASAP — and these strategies could be your ticket to doing just that.
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