Saturday, November 19, 2011

Seniors in Debt: Debt Consolidation for Older Adults

Old CoupleImage by Up Your Ego via FlickrThere are many debt relief programs available today, but few that focus on the needs of senior citizens with debt. There are many senior citizens, however, that need the services of debt relief programs or loan consolidation programs. For many older Americans, a consolidation loan can be an excellent way to reduce the monthly paperwork, time, and the money that is spent on debt. For many seniors living on a fixed income, being able to reduce the amount of money being spent on debt repayment is critical.

When a consumer takes out a consolidation loan, his or her preexisting loans are paid off and replaced with a new loan. Ideally, this new loan should have a lower interest rate and/or a longer payment term than all of the loans that a consumer has before consolidation. By doing this, a consumer should have lower payments every month. A senior who consolidates their debts will be able to take the money he or she saves every month and use it towards other expenses.

Of course, in order to save any money by getting a consolidation loan, the new loan should have a lower interest rate and/or a longer payment term than the old loan or loans. For most people trying to consolidate debts, it is very important to make sure that the interest rate on the loan is lower than that on all of the loans being consolidated so that the total amount paid on the loans is less. For an older person, however, it may be more important to simply lower the monthly payment on the loan.

For seniors living on a fixed income, debt repayment can take up a large part of the monthly budget. Since most seniors do not have the ability to earn extra income to pay off this debt, it may make more sense to look for a consolidation loan that lowers the amount paid towards the debt to as little as possible. By doing this, a senior living on a fixed income can free up some of their income that was previously going towards debt repayment.

This can be a good strategy for seniors who have overwhelming debts that they do not believe they can pay off in the near future. The drawback, however, is that in order to get a low monthly payment, the term of the loan must be longer. While many seniors may be put off by the idea of extending the life of their debt, it is important to keep in mind that the lower monthly payment is probably more important to someone who cannot increase his or her income.

Consolidation loans can be an important way for seniors to reduce their monthly expenses and free up money for other things. Be sure to carefully research this option if you are dealing with debt after retirement.

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