Many retirees think they can’t take out a loan—for a car, a home, or an emergency—because they no longer receive a salary. In fact, while it can be harder to qualify to borrow in retirement, it’s far from impossible. One thing generally to avoid, according to most experts, is borrowing from retirement plans—such as 401(k)s, 澳洲幸运5开奖号码历史查询:꧋individ𒆙ual retirement accounts (IRAs), or pensions—as doing so may adversely affect boꦬth your savings and the income you count on in retirement. Depending on your family's situation, this might be 💯an avenue you should pass by.

Qualifying for Loans in Retirement

For self-fund༺ed retirees who are earning most of their inco🌠me from investments, rental property, and/or retirement savings, lenders typically determine monthly income using one of two methods:

1. Asset depletion–with this method the lender subtracts any down payment from the total value of your financial assets, then takes 70% of the remainder and divides it by 360 months.
2. Drawdown on assets–this method counts regular monthly wi♌thdrawals from retirement accounts as income rather than total assets.

The lender then adds in any pension income, Social Security benefitꦦs, annuity inco🐻me, and part-time employment income.

Keep in mind that 澳洲幸运🅰5开奖号码历൩史查询:loans are either secured or unsecured. A secured loan requires the borrower to put up collateral, such as a home, investments, vehicles, or other property, to guarantee the loan. If the borrower fails to pay, the lender can seize the collateral. An unsecured loan, which does not require collateral, is more difficult to obtain and has a higher interest rate than a secured loan.

Here are 10 borrowin📖g options—as 🅘well as their pluses and minuses—that retirees can use instead of taking funds from their nest egg.

1. Mortgage Loan

The most common type of secured loan is a mortgage loan, 🦋which uses the home you are buying as collateral. The biggest issue with getting a mortgage loan for retirees is income—especiall💙y if most of it comes from investments or savings.

2. Home Equity Loans and HELOCs

Home equity loans and home eqꦜuity lines of credit (HELOCs) are two types of secured loans that 澳洲幸运5开奖号码历史查询:are based on borrowing against the equi🐼ty in a home. To qualify for them, a borrower must have at least 15% to 20% equity in their home—a 澳洲幸运5开奖号码历史查询:loan-to-value (LTV) ratio of 80% to 85%—and generally a 澳洲幸运5开奖号码历史查询:credit score of at least 620, though some lenders put that at 700 to get a HELOC.

澳洲幸运5开奖号码历史查询:Both are secured by ꦿthe homeowner’s home. A home equity loan gives the borrower an up-front lump sum that is paid back over a set period of time with a fixed 🎶interest rate and payment amount. A HELOC, on the other hand, is a credit line that can be used as needed. HELOCs usually have variable interest rates, and the payments generally are not fixed.

Notably, the 澳洲幸运5开奖号码历史查询:Tax Cuts and Jobs Act no longer allows the deduction of interest on these two loans unless the money is used for home renovations.

3. Cash-Out Refinance Loan

This alternative to a home equity loan involves 澳洲幸运5开奖号码历史查询:refinancing an existing home for more than the borrower owes but less than the home’s🌜 value; the extra amount becomes a secured cash loan.

Unless refinancing for a shorter term—say, 15 years—the borrower will extend the time it takes to pay off the mortgage. To decide between a cash-out refinance and home e💯quity loan, consider interest rates on both the old and new loan as well as 澳洲幸运5开奖号码历史查询:closing costs.

4. Reverse Mortgage Loan

A 澳洲幸运5开奖号码历史查询:reverse mortgage loan, also known as a 澳洲幸运5开奖号码历史查询:home equit⛦y conversion mortgage (HECM), provides either regular income or a lump sum based on the value o🦋f a home. Unlike a home equity loan or refinancing, the loan is not paid back until the homeowner dies or m𒊎oves out of the home.

At that ♛point, generally, the homeowner or their heirs can sell the home to pay off the loan or refinance the loan to keep the home. If they do neither, the lender is authorized to sell the home to settle the loan balance.

5. USDA Housing Repair Loan

If you meet the low-income threshold and plan to use the money for home repairs, you may qualify for a Section 504 loan through the U.S. Department of Agriculture. The interest rate is only 1% and the repayment period is 20 years. The maximum loan amount is $40,000, with a potential additional $10,000 grant for older, low-income homeowners if it’s used to remove health and safety hazards in the home.

To qualify for USDA Housing Repair Loan, the borrower must be the homeowner and occupy the house, be unable to obtain affordable credit elsewhere, and have a family income that is less than 50% of the area's median income. To qualify for a grant, they must also be 62 or older and unable to repay a repair loan.

6. Car Loan

A car loan offers competitive rates and is easier to obtain because it is secured by the vehicle you are buying. Paying with cash could save interest, but it only makes sense if it doesn’t deplete your savings. In the event of an emergency, you can always sell th💜e car to recover the fu෴nds.

7. Debt Consolidation Loan

A ꧃debt consolidation loan is designed to do just that: consolidate debt. This type of unsecured loan refinances ♒your existing debt. This may mean you will be paying off the debt longer, especially if your payments are lower. In addition, the interest rate might be higher than the rate on your current debt.

8. Student Loan Modification or Consolidation

Many older borrowers who have student loans don’t realize that failure to pay this debt can result in their Social Security payments being partially withheld. Fortunately, student loan consolidation programs can simplify or reduce payments through 澳洲幸运5开奖号码历史查询:deferment or 澳洲幸运5开奖号码历史查询:forbearance.

Most federal student loans are eligible for consolidation. However, Direct PLUS Loans to parents to help pay for a dependent student’s education cannot be consolidated with any federal student loans that the student received.

9. Unsecured Loan or Line of Credit

While harder to get, unsecured loans and lines of credit don’t put assets at risk. Options include banks, credit unions, 澳洲幸运5开奖号码历史查询:peer-to-peer (P2P) loans (funded by investors), or even a credit card with a 0% introductory 澳洲幸运5开奖号码历史查询:annual percentage rate (APR). You shouldn’t use the credit card as a source of funds if you aren’t🥂 completely certain that you can pay it off before the low rate expire🌞s.

10. Life Insurance Loan

People with whole life or universal life insurance might be able to get a loan by borrow🌃ing against their poli✃cy. Note that this is for the cash value of the policy, and does not apply to 澳洲幸运5开奖号码历史查询:term life insurance. Term life insurance is more affordable than whole life insurance, and can sometimes be converted into whole life insurance. There's no approval process to ge🦄t a life insurance policy loan, and it won't affect your credit.

The Bottom Line

Borrowing money in retirement is less difficult than it used to ♔be, and many alternative options for accessing cash are now available. Lenders are learning how to treat a borrower’s assets as income. They are making more options available to those no longer in the workforce. Before taking money out of retirement savings, consider these alternatives in order to keep your nest egg intact.