How to Become Debt Free for Seniors

Heavy debt can ruin a senior citizen's golden years. Whether or not you have retired, debt presents a special challenge to a senior. You probably have already completed most of your high-earning years. Your income may not even keep up with inflation in the future. However, in addition to the tools that work for younger people, you have special options as a senior that make it possible to become debt-free.

Instructions

1

Write down what you owe. List your creditors, the amount you owe, the interest rate and the minimum payment for each loan. Compute the total debt and total minimum payment, as finance author Jane Bryant Quinn advises in "Making the Most of Your Money Now." Once you know your true situation, you can tackle the problem.

2

Transfer high-interest debt to a lower-interest loan. For example, transfer balances to your lowest-interest credit cards, as Quinn suggests. Do not do this, however, if you will incur prohibitive fees. Roll high-interest loans into a credit union loan or home equity line of credit only if you have sufficient discipline to stop charging.

3

Negotiate lower interest rates on your credit cards. A few phone calls can save you a lot of money on future interest payments. Call the toll-free number for each credit card issuer. Talk to a customer service representative and ask for a lower rate. Ask to speak to a supervisor if necessary.

4

Make lifestyle changes so you can stop borrowing and free up money to pay down debt. If you already practice extreme frugality, this may seem impossible. But Ric Edelman, author of "The Truth About Money," suggests considering all expenses optional, including cable TV and cell phone. Go over your monthly expenses and find ways to save. Look for cheaper car insurance. Use the public library. Buy foodstuffs in bulk. Take advantage of free activities at the local senior center.

5




Put extra money toward your highest-interest debt every month.

Put the extra money you freed up toward paying off your highest-interest-rate debt every month. Make sure you pay the minimum on all your other loans. After you have paid off the highest debt, put extra on the next highest, and so on, until you have paid all loans in full.

6

Take out a reverse mortgage and use the added income to pay down your debts. If you own your home, you may qualify for such a plan, which provides income for the rest of your life. You must, however, continue to live in your home, according to Smart Money. An online AARP calculator (see Resources) will help you determine how much you would get.

7

Tap your cash-value life insurance, as Smart Money suggests. Put the funds toward debt payoff. You can get a "cash surrender loan," which means you will receive the money during your lifetime instead of at death. You do not need to repay this money.

8

Find lump-sum money to pay off debt. Declutter the house and garage and sell unused cars and furniture. Take some money out of savings, if you have any. Jane Bryant Quinn cautions against taking out of retirement accounts, though. Future income from your retirement accounts will help you pay off your debt completely.