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Are Personal Loans a Good Way to Borrow During Retirement?

Updated: Dec 9, 2021

Many elderly Americans find themselves in a financial bind during their golden years. A significant portion of the issue stems from many retirees not being entitled to a pension.

Many of today's retirees didn't save for their golden years on their own, as was the case in previous generations.


A personal loan may be an alternative for retirees who do not have the money to handle an unexpected need. But is it a wise decision to borrow money in retirement? To help you determine that, let us take a look at some points about personal loans and retirement. Read on.


Advantage of Personal Loans during Retirement


Retirement is an excellent time to consider taking out a personal loan to supplement your income. Personal loans provide borrowers with the freedom to borrow money for whatever purpose they see fit. Payments will not hurt your credit score as long as they are made on time and in full each month. Furthermore, the interest rate is far lower than that charged on a credit card debt.


Personal Loans and Retirement


Seniors who rely on Social Security for most of their income often have incredibly tight financial situations. A retired individual who wants to take out a personal loan must first assess whether they can afford the monthly payments. Working part-time can help supplement their income, but health and mobility issues may prevent them from doing so.


Seniors may also make efforts to make borrowing money through a personal loan a less risky proposition. Before asking for a personal loan, seniors should check their credit ratings to ensure that they are in good standing. While it is feasible to get a personal loan with a low credit score, the interest rate is often higher the lower the credit score.


Home Equity Loan and Retirement


If the senior owns their house entirely, they may have an easier time being approved for a home equity loan rather than a personal loan. A home equity loan is based on the amount of equity a borrower has built up in their property rather than their credit score. However, the danger is associated with borrowing against one's house in retirement: Seniors who do not keep up with their payments may find themselves without a place to live.


On the other hand, personal loans are not secured loans, which means there is no particular asset that you can use to secure them. While defaulting on a personal loan might have negative implications, such as a lowered credit score, losing one's house is not one of those punishments.


Conclusion


Borrowing money when you are retired might be problematic since lenders may be wary of lending to someone who has a set, limited income. With personal loans for retirees, you may be able to afford the lifestyle you've always wanted in your golden years.

For retirees who are secure in their capacity to pay back their debts, personal loans are often risk-free.


Stones River provides personal loans in Murfreesboro, TN. We offer a variety of loan sizes to meet your needs, and we work with you to develop affordable payment plans. For additional information about our loans, please contact us at 615-896-5006.

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