Debts have always done harm than good and if you allow them to become chronic, it will make your finances go topsy-turvy. If you are a baby boomer and reeling under a debt spell, you have various debt help options that can give you the much needed financial stability in your life. Getting out of debt is even more important for the seniors as they carry the additional burden of living without an income after retirement unless they have some cash saved for the rainy day.
How should seniors tackle their debt problems? There are 2 ways in which elderly individuals can get debt help. They are –
- Taking out a reverse mortgage
- Using a life insurance policy
Let us see how each of the debt help options bail out baby boomers from a financial stalemate.
Reverse mortgage:
You can take out a reverse mortgage that can pay for your expenses during the post retirement period. The qualifying factors are not rigid and you need to fulfill the following conditions to get access to one –
- You have to be 62 years or more
- The house in which you are staying must be your primary residence
- The property should have enough equity
How does reverse mortgage work as a debt help option?
Your income, credit rating, employment details are not taken into account if you are planning to take out a reverse mortgage. The proceeds of reverse mortgage can be availed in form of monthly payments, line of credit or a lump sum. You can also avail the cash as a combination of the above 3.
Since the proceeds are a part of a loan advance, the amount you receive isn’t taxable. With the help of the money you get from reverse mortgage, you can fulfill any financial obligation you like. It can be paying for home repair, paying taxes, medical bills, funding your grandchild’s education, going for a holiday etc. Alternatively, you can use your life insurance policy for getting access to cash. Let us see how.
Life insurance policy with cash value:
Your life insurance policy can offer debt help provided you have permanent life insurance policy. The premium for a permanent life insurance policy is high. Whatever you pay as premium gets divided into 2 parts – one pays for the death benefit and the other builds up the cash value of the policy which can be regarded as your asset.
If your life insurance policy has enough equity, you can tap the equity to get some cash. You can either cash it in at a suitable time or take out a loan using your life insurance policy as security. The longer the policy has been in place; greater is the equity that has built up in the policy.
If you take out a loan against it, you can pay off your debts with the loan or meet other financial obligations. So, if you are about to retire and you are equipped with enough equity whether it is in form a life insurance policy or your property, it can serve as a debt help option that can curb your debt problems to a remarkable extent.