Where Can I Get a Loan on Disability? Your Options Explained

Living with a disability can present many financial challenges. Between medical bills, assistive equipment and everyday living expenses you may find yourself needing extra funds from time to time. But where can you turn if you need a loan but are receiving disability benefits?

I’ve consulted two helpful resources – an article from Rocket Loans and another from Forbes Advisor – to provide an overview of your loan options when disabled. Keep reading to learn where you can get a loan on disability, what types of loans are available, qualification requirements, and how borrowing could impact your benefits.

Understanding Disability Loans

To start, it helps to understand what people generally mean when referring to a “disability loan” There is no single loan product with that name Rather, it’s a broad term used to describe loans that disabled individuals take out for various purposes, including

• Covering expenses while awaiting approval for disability benefits. Since it can take months to begin receiving payments, a personal loan can help pay for rent, food, utilities, etc. in the meantime.

• Paying for disability-related costs not covered by insurance, like making home accessibility modifications, buying assistive devices and mobility equipment, paying for caretakers, etc.

• Covering any other personal expenses that disability payments don’t cover, like car repairs, debt payments, etc.

So in essence, any type of loan can be considered a disability loan if you take it out while disabled or applying for disability benefits. The most common options are personal loans, mortgages, and auto loans.

Qualifying for a Disability Loan

Qualifying for a disability loan largely depends on the lender’s requirements. However, here are some key factors they commonly consider:

• Credit score – Most lenders will check your credit report and score to assess your repayment risk. Those with very poor credit tend to get denied or offered higher interest rates.

• Income – Lenders want to see you have enough steady income to make the monthly payments. For disability applicants, this often means Social Security disability income.

• Debt-to-income ratio – Lenders calculate your DTI, or the percentage of gross income spent on debt payments. The lower your ratio, the better.

• Collateral – Secured loans require an asset like a car or property to be put up as collateral. This gives the lender recourse if you default.

• Co-signer – Adding a co-signer with better credit/income may help you qualify if you can’t meet requirements on your own. But co-signers are equally responsible for repayment.

While being disabled can’t disqualify you alone, having little income, poor credit, and no co-signer can make getting approved difficult. Specialized disability lending programs do exist, so be sure to research options in your area.

Types of Disability Loans and Lenders

As mentioned, common sources for disability loans include:

Personal Loans – Unsecured loans from banks, credit unions, and online lenders. Loan amounts range from $1,000 to $100,000 usually. Useful for covering any disability costs.

Mortgages – Home loans to finance a primary residence. Disabled veterans may qualify for specialized VA loans with discounted fees. Down payment assistance programs also available.

Auto Loans – Loans to purchase modified vehicles. Some lenders like Bank of America offer specialized auto financing for the disabled.

Government and nonprofit loans – State/federal agencies and nonprofits sometimes offer low-cost loans for home modification, assistive devices, and more. Eligibility requirements vary.

Research multiple lenders to compare interest rates and fees. Online lenders like Upstart and LendingClub offer easy rate-checking and applications. Banks and credit unions provide personalized service but may have stricter requirements. Nonprofits like Kiva offer 0% interest loans funded by charitable donors.

Impact on Disability Benefits

If you receive SSI or SSDI benefits, it’s crucial to understand how borrowing funds could impact your eligibility. Here are some key things to keep in mind:

• Loans themselves don’t count as income for either SSI or SSDI. This means the funds themselves won’t disqualify you.

• However, if you receive SSI, remaining loan funds above $2,000 could put you over the resource limit after the month you receive them. Carefully plan major purchases with loan funds to avoid this.

• Defaulting on loan payments could impact your eligibility if it results in wage garnishment, putting you over the income limits. Make sure you can afford the monthly payments.

• While not income itself, loan payments will reduce the amount of your disability benefits you have left over to live on. Make sure you factor this in.

Alternatives to Loans for Disabled Individuals

While loans allow you to access lump sums for major costs, they aren’t the only option. Here are some other resources to look into first:

• ABLE accounts – Tax-advantaged savings accounts to cover disability expenses without impacting benefits.

• Housing assistance – Federal and nonprofit programs to help with rental costs, utilities, and home modifications.

• Food assistance – The SNAP program provides food stamp benefits to low-income disabled individuals.

• Presumptive disability – SSA programs to receive temporary disability payments while awaiting a decision.

• Family/friends – Ask trusted loved ones for small, interest-free loans before pursuing high-interest debt.

Only borrow when absolutely necessary. Exhaust other options first, create a repayment plan, and borrow conservatively. This will help you avoid jeopardizing your disability benefits.

The Bottom Line

Despite potential hurdles, getting a personal loan, mortgage, or auto loan while on disability is certainly possible if you have sufficient income, a decent credit score, and shop multiple lenders. Just be sure to first explore specialized disability lending programs, government and nonprofit assistance, and other alternatives before taking on interest-accruing debt obligations.

Above all, tread carefully and only borrow amounts you know you can realistically afford to repay on time each month. This will help ensure getting a disability loan improves rather than harms your financial situation. With some diligent planning and research upfront, you can make an informed decision and borrow wisely.