Like all categories of the population, seniors are also exposed to the risk of over-indebtedness. Indeed, with a consequent loss of income at the time of retirement, seniors can quickly see their debt ratio increase, and the balance of their budget falter. Is it possible for them to buy back credit? What are the specific conditions that apply to seniors who wish to carry out a loan consolidation? Here are all of our responses.
Retirement: a key moment when finances can falter
It is a reality, retirement pensions are more and more distant from the last wages. Thus, the replacement rate (percentage of the last salary) continues to drop over the generations. The median replacement rate at retirement is close to 75% currently, according to a study by the Research Directorate (Drees) of the Ministry of Social Affairs.
This rate was still 80% a decade ago. This figure is to be offset with an average amount of retirement pensions which continues to climb, but also longer careers, which thus mean the possibility of saving longer. But for seniors, both the anticipation of retirement and the effective transition out of the world of work lead to major changes in financial terms.
Indebted households are getting older
A substantial and unprepared loss of income can drastically change the standard of living. For people who see their income decrease, but whose burden remains high, then it may be appropriate to make some adjustments:
- Reduce the monthly payments of your mortgage if it is not yet settled;
- Spread expenses and rebalance your budget according to your new standard of living;
- Redeem your home loan to take advantage of a better rate;
- Combine several credits into one to reduce the monthly payments.
Figures from the Home Credit Observatory prove it, the average age of indebted households is increasing. 13.4% of indebted households were between 55 and 64 years old in 1991, against 17.3% in 2014. For those over 65, the proportion was even doubled: 8.3% of indebted households were over 65 in 1991, they were 15.0% in 2014. The question of credit management, and even their redemption, is therefore essential for more and more seniors.
Request a credit buyout when you are senior
Seniors and young workers alike have the same rights when it comes to buying back credit. So, if you are approaching retirement or if you are already inactive, you can very well apply for a loan consolidation. The conditions that will be required will then be identical to those of other households:
- Present personal information but also financial data to allow your contact to understand your situation;
- Make a list of your cash inflows (salary, current or future retirement pension) as well as a list of your fixed expenses.
Financing organizations that offer buy-back credit will monitor the same information as for all files, but will also focus on your age. The increase in life expectancy is taken into account, and it is possible to spread the repayment of loans over a much longer period than in the past.
However, banks have age limits before which repayment must be made. Generally, full repayment of a credit consolidation must take place before the 90th or 95th anniversary. You can take advantage of a very interesting financial package, and new monthly payments which will release the pressure on your monthly budget, even if you are senior!
Pay special attention to loan insurance, however. Indeed, if you apply for a loan consolidation and you are senior citizens, you can benefit from a very attractive rate and adapted monthly payments, but the price of the insurance which will be backed by this loan will logically be higher than for a 30, 40 or 50 year old person. So remember to focus not only on the interest rate on your new loan, but also on the cost of the guarantee. It is in your best interest to entrust your request to a broker who will be responsible for finding the right overall offer, which combines attractive credit rates and reduced total cost of insurance.