Since social security benefits are paid in arrears, and it can take a couple months to be approved, a loan can help a senior pay their bills during that enrollment period. There are some organizations, including non-profits, banks, and for-profit companies, that can provide funds to a senior citizen during this time-frame. The loans can help the senior transition to their retirement years.
One reason that loans may be an option is due to the fact that the Social Security Administration (SSA) recommends that an individual apply for their retirement benefits three months prior to when they want them to commence. This 3 month window of time can potentially create a financial hardship for a senior if they have a major change in their personal circumstances during that period. If their monthly income exceeds their budgeting expenses, it can cause an elderly person to potentially miss paying critical bills include for their health care or food.
For example, what happens if the senior gets sick and needs to leave the workforce, or if their spouse dies, or some other crisis comes up. Another challenge may arise if there is a delay in accessing any funds in a 401K or pension. These transition periods could very well present challenges to a new retiree or someone depending on government benefits when it comes to paying their bills on time. This is where using a low interest loan may be able to help a senior citizen that dependent on social security.
Another reason in which a loan may be beneficial is for someone applying for their social security benefits at age 62. Since the application needs to be completed and submitted a maximum of four months before the payments are suppose to begin, if someone did not complete the application 4 months out (but wanted benefits to start at age 62), then they may need some cash during that time frame. So a social security loan may be able to assist in that example as well.
Anytime that anyone thinks about borrowing money, whether it is a social security loan or any other type of funds, the applicant needs to weigh the risk and rewards. They should closely review their monthly budget. As the process of borrowing money, especially for an older adult on a fixed income, could present challenges if they do not have a plan in place to pay it off. Some of criteria to consider before using an emergency loan to help supplement social security benefits are as follows.
There are a few lenders that can help fulfill this request. It is recommended to speak to different companies before entering into any agreement. Look for the lowest interest rates as well as fees, most affordable payment terms, and in effect the cheapest way to borrow. There may even be some interest free loans available for the senior as well.
Senior citizens on or that are waiting for social security can borrow money from a non-profit credit union. These organizations tend to have lower costs and fees involved. Considering a number of retirees may have pension, and maybe they have worked for the government, a labor union, or another organization they may already be a member of a credit union. If not, they can sign up with one for access to an affordable loan.
If the borrower lacks credit, or maybe they have poor ratings due to living on a limited and/or fixed income, then there are lenders that offer small dollar loans to the elderly. The funds will focus on those individuals with either no or bad credit scores. Everyone from the government to FDIC or local charities offer these services. Read more on no credit loans.
Faith based groups, such as the Jewish Association or a church financial assistance program often provide short term loans to the vulnerable. A senior citizen waiting on their social security benefits to start will often meet this criteria. As these faith based groups do not want the elderly person to go without, so they can offer even interest free loans for paying for everything from medications to housing or utilities.
Senior citizens can turn to a retirement plan for any funds. Accessing those investments can help make ends meet when someone is currently on social security. Or the funds can help pay some bills while waiting to be approved by SSA. Be aware of penalties and/or early withdrawal fees as well as income tax implications when turning to a retirement plan.
Unsecured personal loans may be an option in an emergency. This will tend to help a senior who is on social security if they have very limited assets available to them. The interest rate may be a little higher, but since the funds will only be borrowed for a short period of time this may not be a huge barrier. The cash can be used to pay for various bills, including a mortgage, rent, or medical needs. Find more details on unsecured personal loans.
When all else fails, senior citizens on social security can turn to a non-traditional lender, such as one that issues payday loans. These are high risk and should only be considered when all else fails. Also the borrower should be 100% confident that their application for government benefits will be approved by the Social Security Administration. As using a payday company can come with very high fees and interest rates, and the loan needs to be paid back immediately or the senior can find themselves in a high risk situation.
If a decision is ever made to borrow money (while at the same time as applying to the Social Security Administration) be sure that the application for benefits is filed accurately. If it is not, then there could be a delay in when the first government check is issued. That could then in effect lead to more money being spent on interest for the loan in question, and the borrower could fall behind on their budgeted income/expenses. It is critical to apply correctly, as the first social security check from the government should be used to pay off the loan; that expense needs to be paid off before any other bills that the senior citizen has.
This is one of the big risks. If a senior citizen decides to borrow money, but they do not complete their application correctly or if they are not eligible for some reason, the loan may be more challenging to pay off. So anyone that decides to borrow money need to be 100% sure they will receive their first payment in a timely manner.
What the Social Security Administration requires for applying is as follows. Note they could always come back on request additional material as well. So this is the bare minimum. The senior citizen should have copies of their tax returns, proof of being a U.S. citizen or lawful alien, original birth certificates, marriage licenses and more.
If a senior citizen who is on social security, regardless of their income, ever uses a loan for their bills, they need to pay it off as soon as possible. As once someone retires they tend to have a drop in income, and the lack of a steady household income can present challenges if all of the borrower's debts are not paid off in a timely manner.
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