Credit Consolidation Tips for Senior Citizens

During your retirement years, your goal is to enjoy every day to the fullest, not worry about financial issues or mistakes you’ve made in the past. The last thing you want is to stress constantly over debt.

Unfortunately, debt is a very real concern for many senior citizens. Reaching age 65 or 75 is no guarantee that you won’t be facing mountains of debt that need to be repaid. However, debt is not a reason to be upset with yourself or give up. There are plenty of ways to improve your financial circumstances and enjoy your retirement.

Consolidating your credit, or debt, is the process of combining debts into one lump sum from multiple sources such as credit cards and other loans. This results in one payment, which is often lower and at a lower interest rate. These credit consolidation tips can assist senior citizens in reducing their total debts and focusing on a more comfortable retirement.

Why Many Senior Citizens Carry Debt

Of course it is ideal to have paid off any debts in full before reaching retirement age. This would greatly decrease your living expenses and your income needs in retirement. However, sometimes debt can be unavoidable.

Senior citizens may carry some credit card debt. This is not necessarily due to overspending. Plenty of seniors have gone into credit card debt in order to bail out a loved one, handle an emergency, or pay medical bills. In 2016, more than 34% of senior households carried a credit card balance, according to the National Council on Aging.

Another form of debt common to senior citizens is mortgage debt. It’s possible your mortgage isn’t fully paid off yet by retirement age. A home is a large expense that may make up a chunk of your debt.

Unsurprisingly, medical expenses are another major cause of debts held by senior citizens. Health care expenses tend to skyrocket as you grow older, and oftentimes people are simply unable to pay their bills in full. Insurance may not cover all of the medical costs of aging, leaving you with large balances due to health care procedure costs, prescription drug costs, and more.

Senior citizens may even have outstanding debts such as parental loans for their children’s higher education expenses. The desire to give your children a better future through college and graduate school can lead to paying the price long into your retirement years.

The weight of unpaid debts in your sixties, seventies, and beyond can seem insurmountable. When you’re living on a fixed income from a pension or Social Security, getting yourself out of debt is a challenge. That’s why it’s important to learn some ways of managing and lowering your total debts owed. Here are a few strategies to help senior citizens get a handle on their finances.

Streamline Your Budget

While looking at your budget doesn’t necessarily help you consolidate your debt, it is a necessary means of helping you to pay down your debt and improve your financial circumstances.

Even if you’ve previously followed a strict budget, you have likely changed your spending habits since retirement. More free time to fill often corresponds to higher spending levels. Perhaps you’re going out to dine and socialize with other retired friends frequently. Increased travel expenses or engaging in other leisure activities will often cost you more money.

Take a close look at your income from pensions and other sources, and compare this total to your monthly spending. You want to pinpoint whether you’re overspending in any areas.

Figure out where you can or should cut back on spending, temporarily or long-term. Whatever your debts may total, even six months of more careful budgeting may drastically improve your outlook. Every $200 of spending you can cut out per month is $200 more you can put towards debt repayment.

Downsize Your Home

A common strategy for senior citizens to reduce their total debt load is to downsize their living situation. This step, helpfully, coincides with a typical decrease in the amount of space people need to fit their lifestyle once their working years have concluded.

If you’re a senior citizen with quite a bit of debt, one probable source of debt is your home. Having a balance remaining on your home of tens of thousands of dollars (or more) can seriously eat into your retirement budget and lifestyle. Even if you own your home outright, downsizing to a smaller home or apartment could free up a significant amount of cash to put towards paying off other debts.

Consider how much living space you truly need right now and for the next phase of your life. Perhaps extra bedrooms aren’t a necessity now, assuming children are grown and out of the house. If you’re growing tired of lawn and home maintenance as well, downsizing to a smaller place or one that handles those tasks for you may be appealing. You could use the proceeds from selling your larger home to not only put you into a new living arrangement, but also knock out some or all of your debt.

Another form of “downsizing” may be to move in with family members. If an adult child or sibling has the physical space and is willing, sharing a home with that family member could greatly reduce costs for both parties. This may be a temporary option to save money for a year or less, but could even be beneficial for a longer-term solution.

Consider Working Part-Time

While this is certainly not a feasible option for all senior citizens, for those who feel strong and energetic enough, taking on part-time work can be a great way to increase income. There are jobs that can be done from home, freelance consulting jobs, and plenty of other possibilities.

Working full-time is probably not high on your radar, but even a few hours a week could go a long way towards reducing your debts. Plus, a job lends additional purpose and joy to your day-to-day life, particularly if it’s work you enjoy or have always wanted to try.

Credit Card Balance Transfers

One way to reduce your debt payments and consolidate some of your debts is by utilizing credit card balance transfers. Often, card companies make attractive offers of temporary 0% financing, meaning if you transfer some of your debts from a high-interest account to a 0% credit account, you’ll save money in interest charges.

Simply pay that account until the amount is paid in full. If your debt is particularly high, you may need to shift to a different balance transfer offer after the introductory 0% period is over (often 12 or 18 months).

Debt Negotiation

Hiring a professional firm to negotiate your debts may be a useful strategy for senior citizens. This entails negotiating for a settlement amount that would clear your account from all debts, but paying a lower total than you officially owe. Some lenders are willing to accept a fraction of the amount owed in exchange for a guarantee they’ll at least get some of the money back.

Debt Consolidation

Consolidation means to bring together two or more items under one entity. So if you have multiple accounts on which you owe money, it could be beneficial to unify each of those debt totals under one lender. Banks and credit unions can offer consolidation services in order to reduce the amount of interest a borrower has to pay.

Having a high credit score is always an advantage when trying to consolidate your credit. Putting all of your debts into a single loan balance simplifies your repayment process, as you’ll only have to remember one payment each month. In addition, interest rates are often lower for consolidated debts, saving your money on payments and over the long term.

Credit Counseling

Senior citizens can benefit from meeting with a credit counselor who will help them to understand the current state of their finances and what their next steps should be. There are nonprofit credit counseling agencies available to answer questions, offer budgeting assistance, help you figure out financial paperwork, and more.

There is help available for you to better manage your finances. Many credit counselors will even work with you over the phone or online.

Senior Debt Relief Programs

You may wish to look into government-run debt relief programs available to senior citizens. These may be through the state or federal government, intended to assist seniors with financial counseling, debt relief, and other options.

Some programs enable you to apply for debt forgiveness, lower monthly payments, or other strategies to help you manage your bills and debts.

Your AARP chapter can be a useful resource as well as other local organizations in place to assist seniors. Check with them if you need help securing legal advice, managing your budget, and figuring out the best course of action for managing your debts.

Reverse Mortgage

For senior citizens aged 62 or older, one possible — though complicated — means of getting more money in your pocket to pay down debts is the reverse mortgage.

Seniors may take out a reverse mortgage to help cover medical expenses, pay off debt, or make monthly living expenses more manageable. Essentially, a reverse mortgage enables you to convert a portion of the equity in your home into cash. You hold onto the title and occupancy of your home, but you receive payments from that part of the equity.

Reverse mortgages must be paid back upon the sale of the home (or when the last surviving borrower dies or is no longer a resident of the home).

A downside is the potential fees such as closing costs, service fees, and mortgage insurance premiums. Be sure you’re fully aware of all costs involved in a reverse mortgage before signing an agreement.

Another downside is increasing interest over the life of the loan. These interest rates are not necessarily fixed, and if the rates are variable, that means the interest amounts could greatly increase as years pass. In addition, the interest on a reverse mortgage is not tax-deductible.

A home equity line of credit (HELOC) offers similar benefits to a reverse mortgage.

Personal Loan

Another way of freeing up funds to pay off debt is by taking out a personal loan. This is fairly straightforward: you take out a new loan to cover the cost of debt repayments. As long as your personal loan comes with a reasonably lower interest rate than you are currently paying on your debt, you’ll come out ahead.

Just be sure to make the payments on time and in full for the new loan as well. This simplifies your repayment period, as you can take out a single loan and make a single monthly payment that essentially covers all of your previous loan amounts.


Bankruptcy is not something to approach lightly. However, in very extreme cases, you may benefit from liquidating your assets through bankruptcy. It is not a pleasant process and will negatively affect your credit score, but can provide you with somewhat of a “clean slate”.

Do your research carefully and be sure you have exhausted all other options for debt relief before approaching bankruptcy. You’ll need to consult with legal counsel to understand completely which of your debts are impacted by declaring bankruptcy and how that will impact you.

Use Retirement Accounts

Another strategy for consolidating and paying off your debts is to take money out of a retirement account. With this method, you should proceed with great caution, because if you withdraw funds too early from certain accounts, the penalties and taxes can be overly damaging.

Keep in mind that your retirement money is a finite resource, especially if you have completely ceased working at this point. Ideally, you want to conserve as much of those funds as possible until you absolutely need them. However, in some cases it may make sense to pay off debts using retirement money.

Final Credit Consolidation Thoughts

As a senior citizen, you may be considering credit consolidation strategies to help you get out of debt. Be sure to consult with trusted professionals when weighing decisions; these tips will make it easier for you to improve and protect your finances during retirement.

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