In an ideal world, by the time you reach retirement age, you will have no debt. But that’s not always the case. Credit is really easy to get nowadays, which is why our debt level remains high. But this debt carried over from your working years can be very difficult to pay off while living on a reduced retirement income.
If you’re struggling to make your credit card and loan payments, you’re not alone. Before you decide to apply for personal bankruptcy, however, you should consider other options.
Debt Consolidation Loan
One solution to postretirement debt issues is to secure a debt consolidation loan. With debt consolidation, you’ll pay off creditors by making one payment per month to the consolidation company. This can both reduce your overall interest and break your payments down to a more manageable amount.
Some people consolidate their own debt by taking out a home equity credit line (HELOC) or an unsecured loan at the bank. Doing so successfully means that you must use the HELOC or loan to pay off all your other creditors and, ideally, the HELOC or loan should result in a lower monthly payment and interest. This can be risky, especially when the loan is secured by collateral such as your house, because you could lose the home if you can’t make future payments.
Consumer Credit Counseling
Another way to fix debt problems would be to speak to a consumer credit counseling agency. When you take this route, a professional agent will likely speak to your current creditors to negotiate payment terms by either getting your interest rates reduced or your minimum payments reduced, which will effectively lengthen the number of years you must make the payments. To locate a good credit counseling agency, search online or browse the local phonebook. Remember to qualify the agency by asking them questions about costs and accreditation.
A credit counselor will even sit with you to go over your financial future. They’ll teach you fundamental personal finance skills and can help you produce a budget you can follow. Many will suggest that you cut up your credit cards to help avoid accruing even more debt in the future.
Debt Management Program
You can usually join a debt management program via a consumer credit counseling agency, but you can also locate one on your own. In this program, an agent will review your finances and request certain documents to make sure you qualify. They’ll likely negotiate payment terms with your creditors to lighten your overall obligations. They’ll add up all of your debt and determine the payments necessary to pay all your bills combined. Then, each month, you’ll send that payment to the debt management company. When finding a program, look for a not-for-profit agency that’s been accredited or suggested by a reliable professional.
It’s not impossible to get out of debt, even after retirement. But it is important that you not continue to create debt while you’re digging your way out. Control your spending so that it doesn’t exceed your income and focus on creating a budget that maintains an affordable, realistic lifestyle so that your retirement savings can last for years to come.