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官方开奖结果体彩网:individual r♊etirement accounts (IRAs), or pensions—as doing so may adversely affect b🌸oth 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-funded retirees who are earning most of their income f🤡rom 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 ﷽monthl🌳y withdrawals from retirement accounts as income rather than total assets.

The lender then adds in any pension income, Social Securi𒅌ty benefits, annuity ꦕincome, and part-time employment income.

Keep in mind that 澳洲幸运5官方开奖结𒈔果体彩网: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 borrowing 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 u✱ses the home you are buying as collateral. The biggest issue with getting a mortgage loan for retirees is𝔉 income—especially if most of it comes from investments or savings.

2. Home Equity Loans and HELOCs

Hoℱme equity loans and home equity lines of credit (HELOCs) are two types of secured loans that 澳洲幸运5官方开奖结果体彩网:are based on borrowing a🍬gainst tღhe equity 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官方开奖结果体彩网:loan-to-value (LTV) ratio of 80% to 85%—and generally a 澳洲幸运5官方开奖结果体彩网:credit score of at least 620, though some lenders put that at 700 to get a HELOC.

澳洲幸运5官方开奖结果体彩网ও:Both are secured b🦹y 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, o🔴n the other hand, is a credit line that can be used as needed. HELOCs usually have variable interest r🧔ates, and the payments generally are not fixed.

Notably, the 澳洲幸运5官方开奖结果体彩网: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官方开奖结果体彩网: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 equity l🎶oan, consider interest rates on both the old and new loan as well as 澳洲幸运5官方开奖结果体彩网:closing costs.

4. Reverse Mortgage Loan

A 澳洲幸运5官方开奖结果体彩网:reverse mortgage loan, also known as a 澳洲幸运5官方开奖结果体彩网:home equity༒ಌ conversion mortgage (HECM), provides either regular income or a lump sum based on the value of a home. Unlike a home equity loan or refinancing, the loan is not paid back ꦺuntil the home🌼owner dies or moves out of the home.

At that point, generalꦐly, 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.𒊎 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 the cꦬar to recover the funds.

7. Debt Consolidation Loan

A debt consolida🔯tion loan is designed to do just that: consolid♑ate 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官方开奖结果体彩网:deferment or 澳洲幸运5官方开奖结果体彩网: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官方开奖结果体彩网:peer-to-peer (P2P) loans (funded by investors), or even a credit card with a 0% introductory 澳洲幸运5官方开奖结果体彩网:annual percentage rate (APR). You shouldn’t use the credit card as a source of funds if you aren’t complete💧ly certain that you can pay it off before the low rate expires.

10. Life Insurance Loan

People with whole life or universal life insurance might be able to get a loan by borrowing against th🌌eir policy. Note that this is for the cash value of the policy, and does not apply to 澳洲幸运5官方开奖结果体彩网: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 get a life insurance policy loan, and it won't🙈 affect your cre𝓡dit.

The Bottom Line

Borrowing money in retirementꦆ is less difficult than it used to be, and many a🐠lternative 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.