Why You Should Repay Your Loans Before Stepping Into Retirement?

Retirement is a period people usually associate with a stress-free life. However, if you are stepping into retirement with a huge debt, then it can certainly be very stressful.

Ideally, your retirement should be debt-free, as you will unlikely have a regular source of income, and servicing a debt in addition to your regular living expenses will be a huge financial burden. This is the reason why financial advisors typically advise that one should systematically repay one’s debt before hitting retirement. However, if you cannot do that, then you should make a plan to repay your debt as quickly as possible. This plan should account for your monthly expenses and how you will meet them along with the equated monthly instalments (EMIs) on the loan.

Benefits of Repaying Loan Before Retirement

Here are some of the benefits of repaying your loan before retirement

Reduced Stress: The burden of repaying a loan in the absence of a regular income can be extremely stressful and can also lead to health issues, which typically get aggravated in old age. This can further complicate matters if it requires medication and hospitalisation as that can add to your financial burden.

No Financial Obligations: You will be able to live a dignified life without the burden of a financial obligation. In fact, repayment of a loan before retirement will keep your credit score intact. A good credit score will also allow you to take an emergency loan during your retirement which could otherwise be difficult to come by if you already have an existing loan running.

Higher Savings: A reduced financial obligation will help you save more in your retirement years, thus increasing your savings and cash flow. You may also consider investing small amounts in appropriate instruments in line with your risk appetite for additional returns.

Higher Purchasing power: Being debt-free in retirement will ensure you will have additional money to spare, thus increasing your purchasing power. This will allow you to adequately maintain your health and lifestyle and live comfortably.