Paying off debt can be difficult for retirees, but here’s how to do it.
- A new survey reveals that most retirees have credit card debt.
- Getting a part-time job or, if you’re a homeowner, tapping into the equity in your home, are ways to pay off debt faster.
- Debt consolidation with a balance transfer credit card or personal loan may also be an option.
When we think of consumer debt, it’s easy to assume that young people are the source. But in reality, many older Americans also carry their share of debt. In one Clever’s recent survey, it was revealed that 76% of retired Americans have some form of debt. And 67% of retirees have a balance on their credit cards that is not paid off.
The problem with credit card debt, however, is that it can be costly. And since credit card interest can fluctuate, it’s easy to get trapped in a cycle where that debt becomes harder and harder to pay off.
This is especially true for retirees who have a fixed income. If you’re largely limited to Social Security as a source of income, you may not have much room in your budget to reduce your credit card debt faster than your current rate. But if you’re keen to eliminate that debt for good, here are three steps you can take.
1. Find a part-time job
Many seniors resign themselves to living on Social Security benefits. But nowadays, it may be easier than you 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 working remotely due to the pandemic and are now more flexible. As a result, you may be able to consult remotely in your old field and increase your income in the process. For example, if you were a former numbers digger, you might be able to secure some remote accounting jobs or even data entry jobs.
2. Consolidate your debts via a balance transfer or a personal loan
If you’ve managed to keep your credit score in good shape in retirement, there may be a way for you to make your credit card debt more affordable, which could also make paying it off easier. If you transfer your balances to a new credit card with a lower interest rate — or better yet, a 0% introductory rate — you may have an easier time anticipating that debt and getting rid of it. for real.
Another option is to apply for a personal loan. You will generally pay less interest on one of these loans than what your credit cards will charge you. So if you can’t do a balance transfer or don’t want to go that route, a personal loan is a reasonable alternative.
3. Tap your home equity to make your debt more affordable
If you’re retired and own a home, chances are you have good equity. This is especially applicable right now, as home values are on the rise nationwide.
Just as doing a balance transfer or taking out a personal loan could make your credit card debt more affordable to pay off, so can taking out a home equity loan or a line of credit (HELOC) . If you are able to borrow against your home, you could pay off your credit cards and then pay off your home equity loan or HELOC at a lower interest rate.
That said, you’ll need to be careful to keep up with your home equity loan or HELOC payments. Being too late could put you at risk of losing your home. But these are options worth pursuing if you want to pay off your credit cards and don’t want to risk getting a reverse mortgage.
It’s no surprise that so many retirees have credit card debt. But if you’re in this boat, your best bet is to pay off that debt as soon as possible — and these strategies might get you there.
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