The world is in financial turmoil at the moment, as we are all feeling the effects. While it is the goal of most people to pay off their mortgages and debts by the time they reach retirement, it is not uncommon for people to actually enter into retirement with debts, and even to have to take out new loans during retirement. Let us look broadly at some debt relief solutions for retirees and pensioners.
People are living longer today than ever before, and at the same time, the cost of living is going up, and incomes are shrinking. Today, more than ever before, our life savings are likely to need to last us for much longer. While entering retirement without a debt may be the ideal option, it is not always possible. There are debt relief solutions available for retirees, but any financial options must be considered very carefully before taking any step.
Debt relief solutions can be many and varied, and really what way work for you depends on your individual circumstances. If you have an existing loan, and also own a property, you may choose to use the option of releasing equity from your property in order to pay off an existing loan, thereby devaluing your estate, but becoming free of the existing debt.
There are different types of equity release schemes: one where you can sell a portion of your estate to the lender and this proportion is maintained when the property is sold and the proceeds are split. Another way an equity release scheme works is where you only make interest payments until the end of the loan term and the principle amount remains the same.
One of the debt relief solutions, by way of equity release, is where you release a lump sum from your home, and maintain full ownership of the property. The amount borrowed is repaid once the property is sold. Equity release is aimed specifically at homeowners wanting to use the value of their property flexibly, to optimize their finances better during retirement.
Equity release is a kind of reverse mortgage, where you have access to some of the equity of your property. But a reverse mortgage is one of the debt relief solutions specifically designed to enable pensioners with an existing mortgage or loan to continue to stay in their home. By taking a reverse mortgage, you take an additional loan out against the equity of your home to pay off an existing debt.
This may not be one of the commercially available debt relief solutions, nevertheless it may help you repay your existing debt in full; well certainly not overnight, but it can be a very useful strategy to embark on the path to becoming debt free. There are many ways to cut down on spending in day-to-day life, and individuals and families can work out ways that suit their lifestyle.
For some retirees, the difference between having a debt and being debt free would be to move into a smaller house. For others, downsizing options could only mean cutting down on spending and big one-off expenses.
Senior citizens can be particularly susceptible to spurious financial schemes dressed as legitimate debt relief solutions, but which are in fact designed to prey on vulnerable members of society. In difficult times, people tend to come under pressure to make a decision and having an existing debt during retirement can be a tough thing to deal with. But in order to avoid making potentially disastrous decisions, it is important to exercise caution and be wary of any quick fixes that sound too good to be true.
A financial adviser can help you learn about the different debt relief solutions available and find the right solution to meet your needs. If you have an existing debt and are considering a certain solution to help deal with it, it is important to understand how the scheme or plan works fully before committing to anything.
A licensed financial adviser can help you understand the products you may be interested in. They can also recommend suitable products and explain all the rewards and risks associated with each product. An independent advisor can give unbiased and objective advice about different debt relief solutions, as opposed to a sales pitch about a certain loan or scheme.