If you’re trying to figure out the best way to enjoy your golden years, getting out of debt is a big step in the right direction. Of course, you want to have the right retirement savings and investments, but paying off your debts can help make your golden years much more enjoyable.
When you get out of debt, you won’t have nearly as much to pay each month. Lowering the amount of money, you need to pay out every month can make it easier to retire and enjoy your retirement. Let’s look at some of the best ways to get out of debt quicker as a senior.
Simply Pay Off Your Debts
If you have the means or your debts are fairly low, you can simply pay them off. This option simply means paying down your debt balances until you can pay off the debt for good. Whether it’s a car loan, your home mortgage, or a credit card balance, you can pay it off over time.
In some cases, you can take on a part-time job to speed up the process. Even if you simply earn a few hundred dollars a week, this can help you pay off your debts faster.
While this option might not work for everybody, it can work for some. With a solid budget plan, you can pay off all the debts you make a monthly payment on to free up more money for other things. If you want to pay off your debts quicker, cut everything in your budget that’s unnecessary to free up more money to pay off your debts.
Debt Settlement Program
With a debt settlement program, you can pay off your debts faster and in an easier way. Often, this type of program is used if you’re trying to avoid bankruptcy, but you need some help negotiating settlements for your debts.
If you choose this route to pay off your debt quicker, you’ll pay into the program each month. Once enough has been accumulated your debt settlement team will negotiate a payoff and send one lump sum to the creditor to pay off your debt. They will do this for every debt you need to pay off until all of your debt has been paid off.
Before you work with any debt settlement program, you will want to make sure you understand the tax consequences and what it might do to your credit score. Make sure you speak with an expert to ensure this is the right option for you.
Debt Consolidation
When you use debt consolidation, you don’t actually get out of debt. Instead, you will be taking all your current debts and consolidating them into one loan and one monthly payment. This can make it easier to get out of debt because you won’t have to manage multiple debt payments.
Typically, debt consolidation only works for unsecured debts, but you can refinance your mortgage to include all your debts including auto loans and other secured debts. However, you don’t want to refinance your mortgage or use a home equity line of credit, unless you plan to stay in your current home.
This is a solid option if you have a well-funded retirement account. If you haven’t retired yet, but are planning to, debt consolidation can help free up more money to contribute to your retirement account each month. This option will also have a smaller impact on your credit score compared to a debt settlement program.
Bankruptcy
While bankruptcy should always be reserved as the last option and for extreme circumstances, it’s a viable option for some seniors to get out of debt quicker. Filing for bankruptcy will negatively impact your credit score, but this might not matter so much to you.
Since many retirement accounts and social security payments are protected when you file for bankruptcy, it can work to help you get rid of your debts. A Chapter 7 bankruptcy can be used to liquidate assets, while a Chapter 13 bankruptcy can be used to keep your assets and repay the debts over three to five years.
Use a Reverse Mortgage
You will need to be at least 62 years of age to use this option to get out of debt. A reverse mortgage is not always the best option, but it can work in some situations. If you have significant home equity, you can take out a reverse mortgage against your property and receive the funds in a lump sum, as a line of credit, or as fixed monthly payments.
This type of mortgage is not the same as a traditional mortgage. instead of paying a monthly mortgage payment, the loan is paid back when you pass away or sell the home. In either case, the entire debt will become due and payable.
Federal rules don’t allow the reverse mortgage amount to exceed the value of the home. Plus, the borrower or their heir cannot be held responsible for any difference in the amount when the property is sold.
You can use the funds from a reverse mortgage to pay off your other debts. If you have a large amount of equity, this might be a viable option to get out of debt quicker.
A few more ways to get out of debt quicker as a senior include:
- Government programs – There are some government assistance programs that can help you save money and get out of debt faster.
- Life Insurance Policies – You can borrow against your life insurance or cash out a policy to help you pay off your debts faster.
- Credit Card Debt Counseling – If most of your debt is credit card debt, you can use this type of counseling to help you get out of debt faster.
When you’re ready to retire and enjoy your golden years, choosing to get out of debt is smart. There are many ways to go about paying off your debts faster. Choose from the options on this list and you can get out of debt quicker.
