Most seniors today have some severe financial restraints, which make incidents such as injuries, illness, and accidents much more difficult to handle. When something like that occurs, it may be tempting to take a loan to help pay it off. These loans can come in the form of payday loans, mortgages, and other forms of financing.
Borrowing money always has its own risks, and that’s certainly true for seniors. Three of the most common risks of loans made to seniors include:
1. Predatory lending: Due to their financial constraints, seniors may fall victim to predatory tactics when negotiating loans. These tactics may involve deception regarding the cost or risk of the loan or exacting high amounts of interest if defaulting on the loan looks likely. Other practices may prevent the borrower from taking legal action, such as by signing a mandatory arbitration agreement.
2. High fees: As a part of predatory lending, the loan may involve high fees that make repayment almost impossible, especially with the limited income most seniors get from pension/Social Security. These fees force a default on the loan, leading to a variety of negative consequences. It may also be used to convince the borrower to take out another loan to pay off the first.
3. Loss of assets: Seniors often have more wealth in the form of assets—like a house—than in income. Limited income may lead to difficulty paying back loans (whether or not they involve predatory lending tactics), which could result in forfeiture of assets. This can mean losing a house, car, estate holdings, etc., putting a huge burden on the borrower and his or her family.
When extra money is necessary, such as to cover medical bills or pay for assisted living, it’s important to proceed with caution. Family members can lend assistance with financial matters when needed, whether that’s in the form of providing funds as a gift or helping with navigating the process of borrowing. Senior Care Centers can give information on other resources to help pay for assisted living costs, contact us today.