Pre-retirement people over the age of 55 may need extra money to meet their needs. They may not be able to rely on close family members or friends to help them out. If they own a home, they can get an interest only lifetime mortgage. Also, they can get a payday loan. With an interest only lifetime equity release, the person may only pay the interest, whereas with a payday loan, the person has to pay a specific amount each pay period.
Equity Release Concepts
An interest only lifetime mortgage is a long term loan for people over the age of 55. Other equity release schemes available may not allow a pre-retirement person to get cash. Specialist lenders such as Stonehaven offer the facility to just repay interest only for the rest of their lives. The money can be utilised for anything they wish. Homeowners can remain in their home until they leave permanently. With an interest only lifetime product, the property can still be inherited by a relative once you die. As you are paying the interest on the loan, the interest isn’t increasing.
• Note: depending on the arrangements and the life insurance you have you may not have to sell the home. If you have savings that can pay off the principle balance the home may not be sold. Your family may also be able to save the house from being sold if they have the principle balance. Otherwise the home is going to be sold even if it is an inheritance.
While your family inherits the home after you die, any outstanding loan will need to be repaid. If they are not named in the lifetime mortgage product as a person able to pay the loan for their lifetime it means your family would need to come up with the money or sell the home. So make certain you understand this situation before entering into one of these loans.
Payday Loan Details
On the other hand, with a payday loan, you will pay on the loan until it is paid off. There is a limit in how much you can borrow. Each payday lender has its own rules about how much you can borrow. In order to get a payday loan, you will need to apply online. The online application will ask you for your age, bank account, and income information. As an applicant will be over the age of 55 with a steady income, he or she shouldn’t have a problem of getting approved.
With a payday loan, your credit report isn’t checked, unless it is to verify your identity. The drawback is that you are supposed to pay the loan back on your next payday in full. Otherwise, any outstanding balance is going to accrue a huge amount of interest. Payday loans are not cheap. They are not even as affordable as a standard interest only mortgage that under 55s are able to get for 10 years. This is why looking at retirement products that use equity in your home is a lot better if you are near retirement and need to set up emergency funds. The only difference with mortgage products is the time it takes to get the funds. It can take months, whereas a payday loan can be awarded in as little as 24 hours.
Conclusions of Two Products
With an interest only lifetime equity release, your credit may be checked to see how current you are on your payments. You may be turned down if you have a negative credit score. Some lenders may still be able to work with you, if your credit report is bad. If they do work with you the interest rate will be higher for the month to month payment. You may also see a lower lump sum offered for the principle balance. The good news is that you do not pay the principle sum back until death or you decide to move.
As you consider both products weigh up the pros and cons. Make certain that you do not enter into a situation that is not affordable. You do not want to pay on a loan that should have been paid off after you received your last salary payment. Rather you want to have something that will be affordable throughout your retirement.
An interest only lifetime mortgage and payday loan will allow you to have some extra money to do with as you see fit. Pre-retirement people have income issues also and may need cash immediately. As they have a steady income, it shouldn’t be hard for them to get approved.