How to Clear Debts Before You Retire

By | February 27, 2013

How time flies! One minute you’re at school; the other you’re in the working world; the next you’re approaching retirement. As retirement nears, it becomes more important to clear your debts.

This is particularly the case if you’re relocating to somewhere like the UAE, which is popular as both a tourist destination and retirement destination. If you’re relocating to there, you may even consider taking out a personal loan to help you out with your initial expenses. If you do decide to do this, HSBC can tailor your loan to your circumstances so that your relocation and retirement are both easier.

But that day is still not here yet, so here’s some advice on clearing debt before you retire.

Paying off personal loans

If you’ve taken out a personal loan in the run-up to your retirement, there are two ways you can pay it off. First of all, you can do things the old-fashioned way and reduce your expenses. There are all kinds of ways you can do this. You can use electrical appliances less often. For instance, as well as the health benefits of cutting down on caffeine, you’ll be surprised how much electricity a kettle actually uses.

Then there’s the more modern way of working an extra job. Naturally, all the money you earn from this job is purely for paying off the loan. Going to the cinema or pub on a Friday night with the extra money may be tempting, but remember that when the money’s gone the loan repayments will still be there to make.

Paying off credit cards

One of the simplest ways to pay off a credit card is by taking out a personal loan. This gives you the option to pay a lower rate of interest and, in doing so, save yourself a little money.

Another way of doing this is by paying off the credit card that has the highest rate of interest first. If you have more than one credit card — which a lot of people do — you can consolidate the different balances on a card that offers 0% interest. All good things must come to an end, however, so be aware that this interest rate is only temporary. Check out the standard rate the card will have when the promotion finishes.

Paying off the mortgage

Paying off the big ‘M’ early takes graft, but it’s possible. You can also save some money in the process if you go about it properly.  Making extra payments on the mortgage may incur a small commission, but this is likely to be small change in comparison to what you save. If you shorten the term of your mortgage instead of choosing to pay a smaller quota each month, you’ll pay less in interest.

As retirement approaches, you’ll probably push to pay off your mortgage early. However, don’t neglect other debts with high rates of interest. Otherwise, you may enter retirement with more debt than you thought.

No one wants to enter retirement with debts. You don’t have to, either, if you manage your finances skillfully. With some sound financial planning, hard work, and a bit of common sense, you can put personal loan repayments and credit card bills well behind you, and look forward to a happy retirement. Wishing you the best of luck!

 

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