Are There Loans for Funeral Expenses? Everything You Need to Know

Losing a loved one is devastating. On top of the emotional toll, funeral costs can be a huge and unexpected financial burden. With the average funeral costing over $7,000 in the US, many grieving families struggle to cover expenses. If you’re wondering “are there loans for funeral expenses?”, the short answer is yes. Let’s take a closer look at funeral loans and other options for financing end-of-life costs.

The High Cost of Funerals

According to the National Funeral Directors Association (NFDA), the median cost of a funeral with viewing and burial was $7,848 in 2021 For a funeral with cremation, the median cost was $6,971 Prices vary widely based on factors like where you live and the specific services you require.

A traditional funeral usually includes

• Basic services fee – This covers overhead costs at the funeral home, obtaining permits, securing the death certificate, etc. The national median is $2,100.

• Preparing and embalming the body – The national median is $795.

• Use of facility for viewing and funeral ceremony – The median cost is $1,000.

• Hearse rental – The median is $325.

• Grave liner or vault – The median cost is $1,395.

• Casket – Prices range from around $1,000 to over $10,000. The median is $2,400.

• Headstone and grave marker – These range from $1,000 to $4,000 typically.

With cremation, you avoid casket and burial costs. But cremation still incurs fees including:

• Cremation fee – The national median is $350.

• Basic services fee – The median is $2,100.

• Urn – Prices range from $75 to over $500.

As you can see, even cremation can cost thousands of dollars. Additional fees may apply for things like death certificates, flowers, obituary notices, clergy honorariums, and more.

Why Take Out a Funeral Loan?

Very few families budget for unexpected funeral costs. Even if you have life insurance, the benefit amount may not cover everything. Facing sudden expenses of $7,000 or more puts most people in a bind.

A funeral loan provides funds when you need them most. The lump sum payout lets you cover all upfront costs at the funeral home and cemetery. You can then repay the loan in predictable monthly payments over 1 to 7 years typically.

Benefits of funeral loans include:

• Fast access to funds – Money is deposited directly into your account within a day or two after approval.

• Fixed monthly payments – Repayment terms range from 12 to 84 months. This spreads costs over time.

• May help improve credit – Making on-time payments can boost your credit score.

• Potentially lower costs – Interest rates may be cheaper than credit cards.

• No collateral required – These are unsecured personal loans, so you don’t risk losing an asset.

What Are the Downsides?

Funeral loans also come with some potential disadvantages:

• More debt – You take on a new monthly bill when still grieving. This adds financial stress.

• Missed payments damage credit – Late or missed payments hurt your credit score.

• Higher interest with poor credit – Bad credit means paying more interest over the life of the loan.

• Prepayment penalties – Some lenders charge fees if you pay off early.

• Responsibility falls on one person – Cosigners spread liability, but otherwise you carry the burden alone.

Even with downsides, funeral loans remain one of the most viable ways to finance end-of-life costs for many families. But weigh the pros and cons carefully based on your situation.

What Are the Requirements to Qualify for a Funeral Loan?

Funeral loans are a type of personal loan. So you can expect similar eligibility standards:

• Credit score – Most lenders require a minimum score in the 600s. The higher your score, the lower the interest rate.

• Income – Provable monthly income is required, often a minimum of $2,000 per month.

• Age – You typically must be at least 18 years old.

• Residency – Proof of US residency is required.

• Debt-to-income ratio – Your total debt payments should not exceed 40% of gross monthly income.

Meeting these requirements does not guarantee approval. But they help improve the odds. If your credit needs work, add a cosigner with better credit if possible.

Where Can You Get a Funeral Loan?

You have several options for funeral loan lenders:

• Banks – Large national banks like Wells Fargo offer personal loans. Approval may take longer.

• Credit unions – Community credit unions sometimes offer better rates. But you need membership.

• Online lenders – Companies like Prosper and LendingTree provide quick access to loan offers. More fees may apply.

• Funeral homes – Many funeral directors can direct you to partner financing companies they work with regularly. This simplifies the process.

Shop around and compare costs and terms. Online lenders process applications quickly, but funeral home partners may provide the easiest experience.

What Are the Best Alternatives to Funeral Loans?

If you want to avoid debt, here are some other ways to pay for funeral costs:

• Life insurance payout – Check for any existing policies your loved one had.

• Crowdfunding – Set up a GoFundMe page and ask for donations from friends and family.

• Credit cards – Zero percent intro APR cards allow interest-free payments for up to 21 months.

• Home equity loan – Tap available equity in your home if you qualify.

• Savings – With planning, you can build a savings fund earmarked for final expenses.

• Pre-pay funeral arrangements – Some families directly pay for services at a funeral home in advance.

• Veterans benefits – The VA provides some free benefits for veterans’ funerals.

Think carefully and use a combination if possible. But loans remain the right choice for many grieving families needing immediate funds.

How Much Can You Borrow with a Funeral Loan?

Funeral loan amounts range from $1,000 to $40,000 typically. The amount depends on factors like:

• Estimated funeral costs
• Your income level
• Credit score
• Current debt burden
• Lender policies

Gather multiple funeral home estimates first. This helps you request a loan amount to fully cover anticipated costs.

Online lenders like Prosper set maximums at $40,000. Local banks and credit unions often cap loans at lower amounts like $25,000. Request a little extra padding if possible in case expenses exceed estimates.

What Interest Rates and Fees Apply to Funeral Loans?

Funeral loans have the same costs as other personal loans:

• Interest rate – Expect rates from 6% to 36%. Better credit means lower rates.

• Origination fee – Upfront fee of 1% to 10% of the loan amount.

• Late fees – Ranges from $15 to $50 for missed payments.

• Prepayment penalties – Some lenders charge this fee if you pay off early.

Interest is the largest expense. On a 2-year, $10,000 loan at 10% APR, you’ll pay $1,634 in interest. Always compare rates from multiple lenders. Credit unions and community banks sometimes offer the cheapest rates.

Do Funeral Loans Affect Your Credit?

Funeral loans can help or hurt your credit, depending on how you handle payments.

On-time payments are reported to credit bureaus and can boost your score over time. But missed or late payments drag down your score quickly.

Too many loan applications in a short timeframe also causes a small score drop. So shop around swiftly and limit applications to about 2 weeks. This minimizes the credit impact from rate shopping.

Unless you default, a funeral loan helps build an active credit history. Just make sure you can handle the monthly payments comfortably.

What Are the Repayment Terms on Funeral Loans?

Funeral loan repayment terms are:

• Loan duration – Typically 12 months to 7 years (84 months). Longer terms have lower monthly payments.

• Payment frequency – Monthly installments are most common. Some lenders offer biweekly or semimonthly payments.

• Prepayment – Most lenders allow paying off the balance early with no penalty these days.

• Autopay discount – Set up automatic payments from your bank account to reduce the interest rate by 0.25% to 1%.

Carefully consider the loan duration that matches your budget. A $10,000 funeral loan at 10% with a 5-year term has monthly payments