As people are entering into their retirement years a growing number are doing so with lingering debts owed to credit cards, overdraft facilities and bank loans. In the current financial climate it is becoming increasingly difficult for older people to secure loans to pay off lingering debts and therefore equity release plans may offer a perfect solution to debt management in retirement.

An equity release plan is one of a number of debt management solutions which would allow an individual or couple to access some of the equity they own within their own home in order to generate a large lump sum which could then be used to pay off outstanding debts in their entirety.

This plan would not require any monthly repayments which would then allow a couple to adjust to their new reduced retirement income free of any financial stress caused by repaying debts. Retirement should be a time of financial stability and freedom.

However, it is important to understand that nothing in life is for free and with an equity release plan there are catches. Such plans do not require monthly contributions however this means that any interest accrued is rolled up within the loan and the loan will continue to grow. For those who are not concerned about leaving an inheritance to family this may be irrelevant as equity release plans do not have to be repaid until the house is sold which can only occur on either death or taking into care of the policyholder.

If, like most people, leaving an inheritance to family members is important then a more preferable option may be either a retirement mortgage in which the interest is repaid monthly or alternatively downsizing. Both of these options can allow you to release equity to cover outstanding debts however may be more manageable long-term solutions.