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Getting a loan while receiving disability benefits can be tricky, but it is possible under certain circumstances. In this comprehensive guide, we’ll cover everything you need to know about getting a loan on disability, including:
What is Considered a Disability Loan?
A “disability loan” isn’t a specific type of loan It simply refers to any personal loan taken out by someone who is on disability benefits These loans are often used to
- Cover living expenses while waiting for disability benefits to be approved
- Pay for medical treatments or equipment not covered by insurance
- Make accessibility modifications to your home
- Pay off existing debt
- Cover other personal expenses
Disability loans are usually unsecured personal loans, meaning you don’t need to put up any collateral. Loan amounts typically range from $1,000 to $50,000.
Can You Get Approved for a Loan on Disability?
The short answer is yes, you can get approved for a personal loan while receiving disability benefits. However, there are a few requirements you’ll likely need to meet
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A minimum credit score Most lenders require a credit score of at least 600-650 to qualify for a personal loan. The higher your score the better your chances of approval.
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Low debt-to-income ratio: Lenders will look at your total monthly debt payments as a percentage of your monthly income. The lower this ratio is, the better.
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Steady disability income: You’ll need to show proof that you reliably receive disability benefits each month. Social Security Disability Income (SSDI) and Supplemental Security Income (SSI) both qualify.
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Enough income to make payments: Even if disability is your only income, you’ll need to show you can afford the monthly loan payments. Most lenders require a debt-to-income ratio below 50%.
If you have bad credit or limited income, you may need to apply with a co-signer or look for lenders that offer loans to non-prime borrowers.
How Long Does It Take to Get Approved?
Many online lenders can process disability loan applications very quickly, sometimes within 1-2 business days. However, approval times vary by lender.
After you submit your application, the lender will need to verify your personal information, income sources, credit history, and other financial details. This verification process can take anywhere from one day to two weeks.
If approved, you could have the loan funds deposited into your bank account within a few days up to a week in most cases.
What is the Easiest Disability Loan to Get Approved For?
An unsecured personal loan is usually the easiest type of disability loan to get approved for. Unsecured loans don’t require you to put up any collateral, so the approval process is simpler.
Online lenders and credit unions typically offer the most accessible disability loans. They tend to have lower credit score and income requirements compared to large traditional banks.
Peer-to-peer lending platforms like Prosper and LendingClub are also worth considering. These sites connect you directly with individual investors who fund your loan.
Pros and Cons of Getting a Disability Loan
Pros
- Get access to funds quickly while waiting for benefits
- Can be used for anything – medical bills, home accessibility, debt consolidation, etc
- Fixed monthly payments help budgeting
- On-time payments can improve your credit
Cons
- Adds more monthly debt obligations
- Late payments hurt your credit and may trigger fees
- Loan funding could temporarily reduce SSI payments
- Higher interest rates if you have bad credit
As with any major financial decision, be sure to carefully weigh the pros and cons before taking out a loan. Consider all your options and speak to a financial advisor if needed.
Alternative Ways to Get Funding on Disability
If you are unable to qualify for a personal loan, here are a few other options to cover costs:
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Expedited disability benefits – The Social Security Administration offers expedited benefit payments in certain situations.
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Government assistance programs – Federal and local programs provide help with food, medical care, housing, utilities and more.
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Crowdfunding – Sites like GoFundMe allow you to fundraise for disability-related costs.
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401k loan – You may be able to borrow against your 401k account, if you have one.
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Credit card cash advance – A cash advance from your credit card provides immediate funds. But it also comes with fees and high interest rates.
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Borrow from family/friends – An informal loan from family or friends is interest-free and flexible. But make sure to outline repayment terms.
Tips for Getting Approved for a Disability Loan
If you do decide to apply for a disability personal loan, here are some tips that can help your chances of getting approved:
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Have a co-signer – Adding a co-signer with good credit can improve your odds of qualifying if you have limited credit history. Just make sure the co-signer understands they are equally responsible for repaying the loan.
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Apply with the right lender – Find lenders that specifically mention working with borrowers on disability benefits or those with limited income. Online lenders tend to be most accessible.
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Only borrow what you need – Don’t take out the maximum loan amount you qualify for if you don’t need that much. Keep the loan as small as possible.
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Look for loans with no origination fees – Adding a loan fee to the amount you borrow increases your total repayment costs.
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Set up autopay – Setting up automatic monthly payments from your bank account shows responsibility and can score you a lower interest rate.
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Provide all required documents – Have income statements, bank account info, and any other required paperwork ready when you apply.
Wrap Up
Getting approved for a personal loan while on disability is possible with the right lender if you have a steady benefits income and meet other requirements. Just be sure to only borrow an affordable amount and have a plan to repay it. Consider all your options, and speak to a financial advisor if you need guidance specific to your situation.
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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Mortgages with Disability Income
FAQ
Can people on disability get a personal loan?
How to get a free loan from Social Security?
Can I get an advance on my SSI check?
What is a strange but true free loan from Social Security?
Can you get a loan on disability?
You can get a loan on disability as long as you have the credit score and income to qualify. Lenders cannot use your disability as a reason to deny you a loan. The Equal Credit Opportunity Act (ECOA) expressly prohibits lenders from denying loans or charging higher fees because you receive help from a public assistance program.
What can a disabled person use a personal loan for?
You can use personal loans for almost any expense, such as living costs, medical bills, or adaptive equipment. 2.**Mortgage Loans**: Special programs are often available to help disabled people buy homes.
Where can I get a personal loan if I’m on disability?
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. They often don’t have specific income or credit score requirements to qualify, making it easier to get funds compared to a bank or credit union.
What types of loans can be a disability loan?
Any type of loan can be a disability loan, depending on your definition. Here are some different types of loans that people can take out if they’re disabled: Personal loan.