8 Borrowing Options for Older Americans

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Older people often believe they will have a hard time getting approved for a loan. Whether it is to buy a new house, afford home renovations or repair a car, retired people may need a loan just as much as many younger people. 

While some older people might find difficulty when they go looking for a loan, there are options. As long as you have income or some assets, there should be a lending option available to you. 

The following are some of the borrowing options that may be available to older people.

Home Equity Loans

This is a type of loan that involves borrowing against the equity in your home. With this type of loan, you get a lump-sum payment and then have to make regular payments during the term of the loan. The borrower will need to have at least 15% equity in the home, and most lenders will require a credit score in the mid 600s or higher for approval. This can be a good option because the borrowing costs for home equity loans are usually low.

Mortgage

If you are looking to buy a new home, a mortgage is an obvious solution. The loan is secured against the home you are buying, and payments can be spread out over many years. The only issue for retired people is that some mortgage lenders might worry about your income or whether you will live long enough to make the payments.

Line of Credit

A line of credit is a type of loan that allows the borrower to draw on the funds as needed. You have several options as it concerns a line of credit. Some lenders offer unsecured lines of credit, but they can be difficult to get. If you are a homeowner, a home equity line of credit can be a good option. This is like a home equity loan, but instead of a lump-sum payment, the lender makes the line of credit available to the borrower.

Car Loan

A retired person might need to purchase a new vehicle for many of the same reasons as a younger person. If you are purchasing a vehicle, a car loan makes sense. The loan will be secured against the vehicle, and as long as you have reliable income and a good credit history, it should be easy to obtain a loan for a new car.

Cash-Out Refinancing

This is a type of mortgage refinance that allows you to access some of the equity in your home. With this type of loan, you refinance for an amount lower than the property value, but higher than what you owe on the mortgage. The loan is used to pay the existing mortgage off, but the remaining balance can be released to the borrower as a cash loan secured against the home. You can even extend the term of the mortgage to make the loan easier to pay.

Reverse Mortgage 

If you are 62 or older and own the home you live in, a reverse mortgage can be a good option for borrowing against the equity in your home. With this type of loan, you can get a lump-sum payment, a line of credit or monthly payments that can act as regular income. A reverse mortgage can be attractive to older people because no payments are due until the borrower dies or moves from the home.

Payday Loans

If you have reliable income, you can get a payday loan. The idea of the loan is that the lender provides a payment to the borrower and it is secured against expected income.  For most retirees, that income would be something like social security payments or payments from a pension. These loans can be easy to get, but they tend to come with high fees and interest rates. Most older people would be better off avoiding payday loans if they can.

Debt Consolidation Loans

A debt consolidation loan is a type of loan you take out to pay off existing financial obligations. The idea is to consolidate the existing debts into one payment to make it easier to manage. This can offer a way to get out of debt if it is handled properly. In some cases, you can get lower interest rates or make the payments more manageable by extending the term of the loan.

Borrowing usually isn't as easy for older people, but there are loans available for most people. You just need to take the time to weigh your options and investigate different offers from multiple lenders. With a little work, you should be able to find the best loan for your circumstances.