Paying off debt can be a challenge for retirees, but that’s how it’s done.
- A new survey reveals that most retirees have credit card debt.
- Getting a part-time job or, if you own a home, taking advantage of home equity, are ways to pay off debt faster.
- Debt consolidation with a balance transfer credit card or a personal loan may also be options.
When we think of consumer debt, it’s easy to assume that young people are the source of it. But in reality, many older Americans also have their share of debt. In a recent survey by Clever, 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.
However, the problem with credit card debt is that it can be expensive. And since credit card interest can be variable, it’s easy to get caught in a cycle where debt becomes increasingly difficult to pay.
This is especially true for retirees who are on 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 down credit card debt faster than your current pace. But if you’re itching to eliminate that debt for good, here are three steps worth taking.
1. Find part-time work
Many seniors resign themselves to living on Social Security benefits. But these days, it may be easier than you think to land a part-time job that could boost your income and give you money to pay off your credit card debt.
Many employers have gotten used to remote work due to the pandemic and are now more flexible. As a result, you may be able to consult in your old field from afar and increase your earnings in the process. For example, if you were a former number processor, you might be able to get some remote accounting jobs or even data entry jobs.
2. Consolidate your debt through a balance transfer or personal loan
If you managed to keep your credit score in good shape in retirement, then there may be a way to make your credit card debt more affordable, which could also make it easier to pay off. If you transfer your balances to a new credit card with a lower interest rate, or better yet, a 0% introductory rate, then you’ll have an easier time getting ahead of that debt and getting rid of it for good.
Another option is to apply for a personal loan. Typically, you’ll pay less interest on one of these loans than your credit cards will charge. 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. Take advantage of home equity to make your debt more affordable
If you’re retired and own a home, chances are you have a good amount of equity in it. This is especially true right now, as home values have risen nationally.
Just as doing a balance transfer or getting a personal loan might make your credit card debt more affordable to pay, you might also be able to get a home equity loan or line of credit (HELOC). If you can 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 stay current on your HELOC or home equity loan 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 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, the best thing to do is pay off that debt as soon as possible, and these strategies could be your ticket to doing so.
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