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Having a disability can make it difficult to work and earn an income. As a result, many people with disabilities rely on government benefits as their main source of income. However, living on a fixed income can be challenging, especially when unexpected expenses come up.
If you have bad credit in addition to being on disability, getting approved for a loan may seem impossible. But there are some options available that may work for your situation. In this article, we’ll explain what bad credit disability loans are, who qualifies, and where to find them.
What Are Bad Credit Disability Loans?
A bad credit disability loan is simply a personal loan for someone who is currently receiving disability benefits and also happens to have bad credit. These are unsecured personal loans, meaning you do not have to put up any collateral.
Bad credit disability loans can be used for almost anything – paying medical bills, making home modifications, consolidating debt, covering basic living expenses if money is tight, and more. They provide access to credit for people who might not qualify for other types of financing.
What Credit Score is Considered Bad Credit?
There isn’t one single credit score threshold for “bad” credit. Different lenders have different standards. But in most cases a FICO score below 620 is considered bad credit. This means you’ll have a hard time getting approved for financing from traditional banks and credit unions.
As your score drops even lower, into the 300s or 400s, very few mainstream lenders will approve you. Your options become even more limited. But there are still some bad credit disability loan providers that may work with you.
Who Qualifies for Bad Credit Disability Loans?
To qualify for one of these loans, there are normally three main criteria:
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Currently receiving disability benefits – This includes SSDI or SSI. Disability benefits are your main source of income.
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Bad credit – Each lender has its own minimum credit score requirement. But usually, scores in the 500s or lower qualify.
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Regular monthly income – You must have consistent disability benefit deposits each month. These serve as “income” that you can use to repay the loan
Income requirements vary by lender but often range from $800 to $1500+ in monthly disability benefits.
Where Can I Get a Bad Credit Disability Loan?
You won’t find disability loans at your local bank. Instead, you need to explore specialized online lenders that work with bad credit borrowers on disability:
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PersonalLoans.com – Bad credit OK. Minimum credit score 550. Maximum loan amount $35k.
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LendingClub – Minimum credit score 600. Maximum loan $40k.
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Avant – Minimum credit score 580. Loans up to $35k.
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Upstart – Minimum credit score 580. Maximum loan amount $50k.
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LendYou – Caters to borrowers on long term disability. Minimum credit score 550. Up to $5k loans.
The application process for these lenders is 100% online. You’ll need to provide documents that verify you’re currently on disability benefits. Approval decisions are usually very fast.
Pros of Bad Credit Disability Loans
- Access to credit those with bad credit often can’t get elsewhere
- Fast approvals and funding in as little as 1 business day
- Fixed monthly payments that are predictable
- Online applications without needing to go into a bank
- Can be used for any purpose
Cons of Bad Credit Disability Loans
- Interest rates tend to be higher than with good credit, often in the 18-35% range
- Lower maximum loan amounts compared to standard personal loans
- Monthly payments can be unaffordable if loan amount is too high
- Late fees or defaulting can worsen your credit situation
What is the Maximum Loan Amount I Can Get?
Loan amounts for bad credit disability loans don’t usually exceed $40,000. Some lenders cap them at $10,000 or $15,000.
The maximum you qualify for depends on factors like:
- Your monthly disability income
- Credit score
- Debt-to-income ratio
- Other monthly bills and expenses
Even if a lender advertises up to $40k, you may only be approved for a smaller amount based on your financial situation. It’s important not to borrow more than you can reasonably afford to pay back each month.
Do I Need a Cosigner?
Some bad credit lenders require a cosigner if your credit score is very low. Others may approve you without one. Bringing on a cosigner can help you get approved and/or qualify for a lower interest rate.
But cosigning is a big responsibility. The cosigner becomes equally liable for repaying the loan. If you miss payments, it damages their credit too. Only ask someone to cosign if you’re absolutely certain you can afford the monthly payments.
How Do I Apply for a Bad Credit Disability Loan?
Applying is quick and easy since it’s all done online. Have the following information ready:
- Your contact and income information
- Bank statements showing disability deposits
- Government-issued ID
- Social security award letter or other proof of benefits
The lender will check your credit report and income documents. As long as you meet the requirements, you could have your loan approved and funded within a day or two.
5 Tips for Getting Approved:
- Shop around with multiple lenders to compare loan offers
- Only apply for what you can afford to borrow based on your budget
- Try adding a cosigner if you’re right on the edge of a lender’s requirements
- Check your credit report for errors before applying – fixing them can boost your score
- Pay down other debts and avoid new credit inquiries if possible
Be Cautious of Predatory Lenders
Those with bad credit are often targets for predatory lenders. Avoid loans with:
✗ Hidden fees
✗ Extremely high interest rates
✗ Mandatory arbitration clauses
✗ Prepayment penalties
Stick to reputable online lenders and review all terms carefully before accepting a loan offer. Getting a bad credit disability loan is possible with the right lender, so don’t settle for unfair loan terms.
Alternatives to Bad Credit Disability Loans
If you’re unable to qualify for a private disability loan, other options may include:
- Borrowing from family or friends
- Crowdfunding for medical expenses
- Payment plans with healthcare providers
- Applying for charity medical grants
- Social services like rent, food, and utility assistance
- Low-interest credit builder loans to gradually improve your credit
The Bottom Line
Having bad credit and being on disability benefits limits your financing options. But bad credit disability loans serve an important purpose by providing access to credit that subprime borrowers often desperately need.
Just make sure to compare multiple lenders to find the best loan for your situation. And always borrow responsibly – don’t bite off more than you can chew with the monthly payments.
Who qualifies for a disability loan?
Because a disability loan is a personal loan, approval will be based on the lender and your financial history. The eligibility requirements will vary from lender to lender. If you don’t meet the requirements, most lenders will allow you to apply with a co-signer to increase approval odds. Your interest rate will also be determined by your credit history, so the better the score, the lower the interest rate.
Disability loans aren’t processed through the SSA like disability benefits are. Instead, disability loans go through a private lender. Therefore, they should only be taken out as a last-resort option if you have a repayment plan to pay off the balance. Keep in mind that it may not be the best idea to rely on disability benefits as a way to pay off your loan, as the government could deny your claim.
Before applying for a loan, make sure you’ve already applied for disability through the SSA, as the loans are a short-term fix, not a long-term solution.
Types of disability loans
Your options for disability loans include secured and unsecured personal loans from banks, credit unions and online lenders.
- Unsecured personal loan: A personal loan that doesn’t require collateral. Since collateral is not required, your approval and borrowing limit are greatly influenced by your credit score and financial health.
- Secured personal loan: A personal loan that requires the lender to place a lien on the borrower’s collateral, often a vehicle, house, or other asset of significant value. The lender can seize the asset as payment if the loan is not repaid. With secured loans, the lender assumes a low financial risk, so this type of loan is easier to qualify for and the borrowing limit tends to be high.
- Payday loans: A short-term loan repaid on the borrower’s next payday or when their monthly SSA benefits are received. The borrowing limit varies, but the common payday loan amount is $500. Depending on the lender, you may be able to renew or extend the loan if you are unable to repay it by the due date. However, since these loans come with annual percentage rates as high as 400%, only use them as a final resort.
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FAQ
Can I borrow money from my disability check?
Can people on disability get a personal loan?
How to survive financially while waiting for disability?
How to get off of social security disability?
What are SSDI loans for bad credit?
SSDI Loans for Bad Credit Loans for people on Social Security Disability Insurance (SSDI) benefits enable recipients with bad credit to borrow money against future government checks without jeopardizing their eligibility. SSDI covers workers who funded the system via FICA payroll taxes.
What are the best loan options if you receive disability payments?
Here are some of the best loan options if you receive disability payments: Personal loans. Online lenders that cater to bad and fair credit borrowers are a good place to look for a loan if you’re on disability.
Can you get a disability loan based on your credit?
The bad news is that you’ll still need to qualify for the loan based on your own credit and income, and that can be challenging for some people with disabilities. Even worse, in some cases, taking out a loan can impact your eligibility for benefits.
Should I get a personal loan if I’m disabled?
For those who are disabled, a personal loan can be helpful in situations that require: Covering costs before receiving disability benefits: A personal loan can pay for living expenses before you’re approved for disability payments. These living expenses may include groceries and/or housing.