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nigel woollsey

Nigel Woollsey

Online Writer
Published: 03/02/2020

At a glance

  • Having trouble with debt in retirement is becoming more common.
  • Some lenders may have a maximum age limit when applying for credit but there are many others who have no such restrictions.
  • Prioritise your debts, dealing with the most critical first.
  • Make sure you take independent financial advice – especially if you are considering equity release as a way out of debt.

What are your credit options when you are retired?

The options for borrowing money when you are retired are a little more limited. However, there are three main routes you can take, depending on the qualifying criteria for each individual product:

Loans – personal and secured

Personal loans are also called unsecured loans. They do not require you to put up any collateral (physical assets, such as your house or car) against the monies borrowed. Some providers have a maximum age that they will accept applications from or a maximum age when the loan is due to finish.

Secured loans are most often taken out against property you own. These can sometimes be called ‘second mortgages’. These are often preferred for larger sums over longer periods, e.g. in excess of £25,000 over 10 years or more. Again, some lenders have a maximum age when the loan or mortgage ends. They are only available if you still have an outstanding mortgage on your home.

Credit cards

While credit cards most often don’t have a maximum age for holders, they may insist on a minimum income. Therefore, if your total retirement income is less than this you will be refused. However, for those that do qualify, there are a host of 0% interest offers that can be used to tackle debt.

Equity release

If you are 55 or over and own your own home, you could consider using equity release to significantly boost your retirement income. You can normally release up to 40% of the value of your home and continue to live there, usually without having to make any repayments.


How does debt affect my credit score?

See our how debt impacts your credit score guide for more info on how lenders assess your creditworthiness.

What to do if you are retired and struggling with debt?

More older people than ever are heading into retirement with outstanding debts, and sadly, the number of retirees who are experiencing problems with debt is on the rise. However, there are several options that older people can use to free themselves from levels of unhealthy debt.


Managing debt when retired

Tip # 1 – Be honest and get help

Money worries and being in debt can be embarrassing. In fact, some retirees can try to hide their financial problems from partners, friends and family while things just get worse.

The first thing to do is admit there is a problem and seek help and advice. This can be from family, friends or professional help in the form of a debt adviser. The latter may be particularly helpful if your debt issues are large and complex.


Tip # 2 – Prioritise what you owe

Tackle your debt problems head-on by finding out exactly how much you owe and to whom. Once you have this info you can go about making a list of your debts, with the most urgent first – notice, we said most urgent first, not largest or most owed. This is because some things are much more important to pay off as soon as possible.


Priority debts (at the top of your list):
• Mortgage or rent arrears
• Utility bills (especially critical services such as electricity, gas and water)
• Council tax
• Fines and County Court Judgements (CCJs) for debt.


After this you can start to list out any other debts you owe, putting them in order of the most expensive first.

Look at your statements and find out what you are paying the most interest on – checking the APR/APRC is good for this. Those with higher interest rates are those that are clocking up additional debt the fastest and need to be dealt with first.


Tip # 3 – Draw up a budget

If you haven’t done so already, sit down and start to work out a budget. Put the most important of your monthly outgoings first (much like tip #2) followed by everything else you pay out over the course of a month. Don’t forget to include any regular payments you are making to service your debt.

Now you can write down the total income you receive in a month. Be sure to include things like your state pension, any private pensions or annuities you have and income from other things, such as shares or maybe property if you are a landlord.

Next, deduct your total monthly expenses from your income. What remains is the surplus you must live on, including groceries (if you didn’t list these in your monthly expenses) and leisure. Now, at least, you know what your disposable income is.


Tip # 4 – Consider moving to a cheaper interest rate

Credit cards and store cards can be some of the most expensive debts to service. Typically, they have high interest rates and if you are only ever paying the minimum payment per month, they can clock up eye-watering amounts of additional interest.

Instead, consider moving your existing credit and store card debts across to a 0% interest balance transfer card. As the name suggests, these offer you a completely interest-free starting period – sometimes up to around 29 months. This means you can make real in-roads to paying off your debt without the high interest. After the interest-free period ends, there is nothing to stop you transferring the debt again to another 0% interest card.

To remove temptation while you pay off the debts it may be an idea to cut up your credit cards. Once you have cleared the debt on your expensive credit and store cards, it may be a good idea to close these accounts.


Tip # 5 – Other ways of clearing debt when retired

As mentioned in the section ‘What are your credit options when you are retired?’, there are a number of options open to retirees when it comes to paying off or perhaps consolidating your debt at a lower interest rate.

These include personal or secured loans, moving to a credit card with a lower APR and releasing some of the equity locked up in your property, if you are a homeowner.

Before deciding on one or more of these courses of action, it is strongly recommended that you seek independent financial advice – especially if you are considering the equity release option.


How and when to seek help with your debt

For more ideas on budgeting, see our how to manage personal debt guide or get more help and tips with our When to seek help with your personal debt guide.

Ways of increasing your income when retired

Perhaps you are feeling the pinch in retirement and might be interested in increasing your income rather than relying on a pension? If so, you have a range of options to boost your monthly income:

Carry on working and semi-retirement

If you are healthy and active, why not consider staying at work for a few more years? Or getting a part-time job to keep you busy and have more money coming in.

Cut back on expenses

When was the last time you looked at your utility bills? Are you on the best deal or paying over the odds for your energy, telephone or insurance? Get yourself onto a few price comparison websites and see if you can switch to a cheaper provider.
Are there some things you are paying for that you simply don’t use? A gym membership? Full European breakdown cover for your car when you never drive abroad? Check to see what you may be unnecessarily overpaying on.


Are you claiming all the social security benefits you are entitled to? Are you sure? Remember: you need to claim to get the cash and you might be entitled to a benefit without even realising it.


Once the children have flown the nest you may be wondering why you still need so many bedrooms and such a big garden to care for. Downsizing can liberate a substantial amount of cash for homeowners and carries the additional benefit of smaller maintenance bills and cleaning demands.

Moneyfacts tip

Moneyfacts tip nigel woollsey

No matter how desperate your situation, never use payday loan providers or loan sharks – the interest rates you will be charged are truly enormous and could quickly become more than your original debts

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

At a glance

  • Having trouble with debt in retirement is becoming more common.
  • Some lenders may have a maximum age limit when applying for credit but there are many others who have no such restrictions.
  • Prioritise your debts, dealing with the most critical first.
  • Make sure you take independent financial advice – especially if you are considering equity release as a way out of debt.

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