The following blog post will address some frequently asked questions about senior debt relief programs as of 2023, starting with the most basic ones;
- What is senior debt relief?
- Is debt forgiveness for seniors available?
Senior debt relief programs and loans as of 2023 include:
- 1.) debt settlement
- 2.) consumer credit counseling
- 3.) debt consolidation
These three methods to deal with debt can be very effective, but there are often misconceptions and confusion around how they work;
- First, not all companies and programs are created equal.
- These three options may sound alike, but they are NOT the same.
- Not only should you understand how these debt management plans work, but you also need to understand the effect they can have on your credit score.
Let’s dive in and discuss each plan in detail.
1.) Debt Settlement for Seniors
Deb settlement is the program with the most potential downsides, but it also offers the best potential savings (i.e., debt forgiveness). Senior citizens can use this program to help them escape high unsecured debt and credit cards they can’t afford.
Deb settlement may be worth considering if you answer “YES” to any of the following four questions.
- Can you only pay up to minimum payments on high balances or maxed-out credit cards? At this rate, it could take 5-10 years or longer to become debt free.
- Have you fallen behind on your monthly payments? Debt settlement can provide you with a lower monthly payment than creditors may be willing to offer.
- Do you have collections on your credit report? Debt settlement can specifically address collection accounts, helping you pay them off for less than the entire balance, resulting in a portion of the debt being forgiven or canceled.
- Have you recently experienced financial hardship or a reduction in income and are now contemplating Chapter 7 bankruptcy (BK)? Debt settlement is considered a financial hardship program, so it would be ideal for helping you avoid having to file for BK in this scenario.
How does a settlement program work?
A debt settlement program sets clients up with a single monthly payment. This payment is calculated after a budget analysis is created. The monthly payment is designed to help clients pay off all their debt in under four years.
However, monthly payments do not go to creditors. Instead, clients must stop making payments to their creditors. As a result, payments fall delinquent to the point where accounts eventually get written off and sold to third-party collection agencies. At this point, creditors are willing to work out an affordable debt repayment plan, fearing they will never get paid because the debtor could get forced into bankruptcy or due to the statute of limitations on a debt eventually expiring.
Within about six months after enrolling in a settlement plan, as monthly payments accumulate in a special debt settlement program account, the company starts negotiating with creditors to reduce the balance of one of the accounts enrolled in the plan. When they get an attractive offer, a settlement offer, a client can either agree or reject it.
Example: Credit Card Debt with a balance of $10,000 gets resolved for around $7,500:
The debt negotiators may get an offer to settle and pay off a $10,000 credit card debt for only $5,500, saving the client $4,500. If the client agrees, they get everything in writing from the creditor, and the deal is finalized.
Then, the funds get released and paid directly to the creditor from the client’s program account. After the creditor is paid, the company will earn its fee. And their fee could be around $2000 – $2500 based on $10,000 of total debt. So, a client in this example would pay only about $7,500 to resolve $10,000 in debt.
Each debt is settled and paid one by one until clients are debt-free.
What about the downsides of a settlement program?
These programs can sound extremely attractive, obviously, not having to pay the entire balance and with no interest. However, downsides can come from it because creditors don’t get paid every month. Consequently, creditors can come after clients with collection calls, send collection letters, and sometimes even issue a credit card summons.
Before doing business with a debt settlement company, verify the following:
- Is the company BBB A+ Rated, Licensed, and Accredited by the International Association of Professional Debt Arbitrators (IAPDA)?
- Does the company only charge fees after settlements occur?
- How will a summons get handled if one is received?
Professional and reputable debt settlement companies have thousands of clients and years of experience to help consumers navigate the program successfully.
In addition, companies like Accredited Debt Relief or Beyond Finance are top-rated companies that charge no fees until after results are achieved. Accredited Debt Relief reviews online are excellent; A+BBB rating, IAPDA accredited and is a licensed debt settlement provider.
2.) Consumer Credit Counseling Programs for Seniors
Consumer credit counseling, a credit card debt relief program for senior citizens to consider, allows clients to stay current on monthly payments to creditors while getting their interest rates reduced. Consequently, clients can save money without as drastic of a negative effect on their credit.
If you answer “YES” to the following questions, consumer credit counseling may be the best program for you.
- Are you trying to catch up on credit card monthly payments that you recently fell behind on?
- Are you finding it difficult to pay down your credit card balances due to high-interest rates?
- Do you have over $5,000 in credit card debt that you’re struggling to pay off but don’t want to join a debt relief program that can negatively affect your credit?
It’s a good idea to speak with a non-profit consumer credit counselor for free information and an FTC-compliant debt settlement company before choosing what plan to enroll in because you’ll have compared both options at that point.
Benefits of Consumer Credit Counseling for Seniors:
Consumer credit counseling plans can re-age credit card payments to be current, even improving credit scores. In addition, interest rates can get reduced, allowing clients to become debt free in under five years. Clients are responsible for one monthly payment, while the credit counseling company pays creditors as agreed but at a reduced interest rate.
The main benefits are that your payments are consolidated, interest rates get reduced, and credit card bills can be paid in around five years.
These companies have established relationships with creditors and pre-arranged deals to reduce credit card interest rates. So when calling a consumer credit counseling company, seniors can get a quote right up front with the plan’s details.
Consumer Credit Counseling Vs. Debt Settlement:
Like with debt settlement, senior citizens can use consumer credit counseling to help them get debt relief. However, the program is very different from debt settlement. Monthly payments will be higher with consumer credit counseling than with a debt settlement program. Consumer credit counseling programs last for close to five years, compared to four years or less with debt settlement.
The total debt settlement cost could be around 75% of what a person owes, saving them 25% on their balances, including all fees and interest. With consumer credit counseling, clients pay back 100% of their debt, plus interest rates ranging from 8%-20%, an enrollment fee of up to $75, and monthly fees of up to $50 per month.
3.) Debt Consolidation Loans (also known as “Senior debt refinancing”)
When you hear “debt consolidation for seniors,” know that it’s a loan being referred to.
If you’re a retired senior with bad credit and are looking for a debt consolidation loan, you’ll likely NOT qualify. So beware of subprime lenders that charge high fees. And always check to verify a lender’s license is valid and look up the company’s reviews at the Better Business Bureau (BBB) before giving them your social security number and applying for a loan.
- There are loans and grants for seniors that you may want to consider, depending on your state.
- SSI is a federal government program that provides a monthly cash benefit for senior citizens (age 65 and over), blind, or disabled.
- Here are 25 resources providing financial help for seniors
Low-Interest Loans for Seniors with a high credit score:
Low-interest senior debt consolidation loans are available for applicants with a high credit score and a steady income stream. A debt consolidation loan is used to repay other high-interest loans. You are then left with one loan to pay off.
Best places to get debt consolidation loans and grants for seniors;
- Check with local credit unions
- Explore online lenders
- Go to: https://www.govloans.gov/
- Visit: https://www.usa.gov/grants
- Go to: https://www.benefits.gov/categories/Loans
- Visit: https://www.sba.gov/funding-programs
Sometimes, online lenders offer more attractive loan rates. However, be clear about all fees, including loan origination fees, associated with the loan. And as mentioned earlier, only use a reputable company with top-notch credentials.
Companies will take advantage of seniors by charging high rates and fees on their loans. Sometimes, third-party online lenders will charge you high fees, taking them directly out of the loan before it hits your bank. Some of these online lenders’ policies can be fraudulent, so beware.
Next, check out “The 10 Best Ways to Clear Credit Card Debt“, which explains debt relief programs and includes strategies that consumers can do on their own.
Disclosure: This blog post is not a solicitation or offer to sell any of the services mentioned and is intended to be used purely for informational purposes only. Golden Financial Services is not a debt settlement, consolidation, or consumer credit counseling company. We are sharing this information to bring awareness about debt relief, settlement, and consolidation options for seniors.