Borrowing as a Senior: What Are Your Options?

Older people might need to borrow just like any other adult. Surprise home repairs or the need for a new car might come up out of nowhere. However, many seniors believe they don’t have many options when it comes to borrowing.

The reality is that older people can still get approval for loans. In fact, there are many borrowing options for older people. You can even find borrowing options for social security recipients.

What are the borrowing options for older people? This post will look at some of the loan options for seniors.

Personal Loans

A traditional personal loan is a good place to start. You can get these loans from conventional lenders like banks and credit unions. You’ll even find online lenders offering personal loans. However, the terms tend to be more favorable through banks and credit unions.

Another question is whether the loan should be secured or unsecured. Unsecured loans don’t require collateral, but they can be harder to obtain and usually cost more. Borrowers also need to consider loan terms like the repayment period and interest rate.

Car Loans

Most seniors continue to drive through their retirement. However, one vehicle might not last the rest of your life. An auto loan can be the perfect solution for financing a car purchase. In some cases, the loan might come from the dealer. In other cases, you might get financing from a bank. In the case of a car loan, the vehicle is collateral for the loan. That means it could be repossessed if you miss too many payments.

Home Mortgage Loans

Most seniors stay in their homes during most of their retirement. However, many seniors also choose to buy a new home. Maybe your home is too big for one person or a couple. Some older people also choose to buy homes in senior communities. You might also choose to move to a place with nicer weather.

Regardless of why you are moving, a home loan is one of the best options to finance the purchase. However, lenders might want a shorter length on a mortgage for an older person. You might also be able to finance much of the purchase with the proceeds from selling your existing home.

Home Equity Loans

Your home can be a valuable asset if you need to borrow. If you have the mortgage most of the way paid off, you can borrow against the equity in the property. Home equity loans are valuable because they can offer significant borrowing power. They are also a good option because the costs are lower than many other loans.

Reverse Mortgages

Reverse mortgages are loans just for senior homeowners. They offer another way to borrow against the equity in the property. You must be at least 62 years old and own your home. However, the key difference from a home equity loan is that there are no required payments. Payment is only due upon the borrower’s death or when the property sells.

When asked about reverse mortgages, an expert from All Reverse Mortgage said, “Seniors need to take their time when considering these loans. Beyond there being different lenders, the terms can vary significantly. Borrowers should investigate reverse mortgage loans and compare their options.”

Payday Loans

Payday loans are typically small short-term loans. The idea is that the borrower will pay the loan back with interest the next time they are paid. You can get these loans even if you are on social security. However, they should only be an emergency option when you need funds in a hurry. Most payday loans have high interest and fees. If you have trouble paying it back, it could trap you in a cycle of debt.

Cash Advance

If you have a credit card, you might be able to get a cash advance by going to an ATM. It can be an easy way to access cash in a hurry. However, the interest and fees may be high. While it usually wouldn’t be as costly as a payday loan, credit card companies typically charge more for a cash advance than they do to use the card for purchases.

Debt Consolidation

What if you carry debt into retirement? A debt consolidation loan could be an option. With this type of loan, you take one large loan to pay off a bunch of smaller loans. It can be especially advantageous if you have a lot of high-interest debt. You take a larger loan with lower interest and combine all the debt into one simple payment. It can make it easier to get out of debt and simplify the payments so you don’t miss anything.

People should be careful about lending regardless of age. Take your time to learn about all your options. Look at the terms, check different lenders, and pick the right loan for the situation.