Individuals receiving disability income may have unique financial challenges, such as increased medical expenses, adaptive equipment costs and potential barriers to consistent employment. Disability loans are personal loans specifically designed for them, but it’s key to vet these loans carefully as rates and terms can vary.
Getting a loan while on disability is possible, but it does require meeting certain qualifications. As someone currently on disability benefits myself, I want to provide a thorough explanation of how the process works, the requirements, and what to consider before taking out a loan.
What is a Disability Loan?
A “disability loan” isn’t a specific type of loan. It simply refers to any personal loan taken out by someone currently receiving disability benefits. The funds from the loan can be used for anything – paying bills, home repairs, medical expenses, etc.
Disability loans are usually unsecured personal loans, meaning you don’t have to put up any collateral. Lenders will make a decision based on your credit score, income, and current amount of debt.
Loan Amounts
Personal loans typically range from $1,000 to $50,000. In some cases lenders may offer up to $100,000 The amount you can borrow depends on factors like your credit score and debt-to-income ratio.
People on disability benefits often have lower incomes, so lenders may offer smaller loan amounts compared to borrowers with full-time jobs.
Getting Approved
To get approved for a personal loan on disability, there are two main requirements:
-
Minimum credit score – Most lenders look for a credit score of at least 600-650. The higher your score, the better your chances.
-
Manageable debt – Lenders want to see that your total monthly debts are not too high compared to your income. This includes credit card payments, student loans, car loans, etc.
Meeting just one requirement usually isn’t enough for approval. You need decent credit AND a reasonable debt load for your current income.
How Long Does Approval Take?
After submitting a loan application, it typically takes 1-3 business days to get an approval decision.
If approved, you’ll then receive the loan funds within a few days after that. Some lenders provide same-day funding if you complete the process early enough in the day.
So in total it can take approximately 3-5 business days between applying and getting the money.
Impact on Disability Benefits
The good news is that taking out a personal loan does NOT affect your eligibility for disability benefits. The loan funds are not considered income, so your monthly disability payment will not be reduced.
However, if you receive SSI and don’t spend all of the loan money in the month you receive it, the leftover balance counts toward the resource limit for the next month’s payment.
For example, let’s say the resource limit is $2,000. You get approved for a $5,000 personal loan but only spend $3,000 of it that month. The remaining $2,000 would count against the next month’s limit.
Pros of Getting a Disability Loan
-
Fast access to funds – If you need money quickly for an emergency expense, a loan can provide funds in a few days.
-
Flexible usage – You can use a personal loan for anything, unlike some types of financial aid that must be used for school.
-
Establish credit history – If you make on-time payments, it shows responsibility and helps build your credit score.
-
Available to people with “bad” credit – Those with scores below 650 still have a chance of getting approved.
Cons of Getting a Disability Loan
-
Interest charges – The interest rate is usually higher than alternatives like federal student loans.
-
Fees – You may have to pay origination fees when you take out the loan. Late fees also apply if you miss payments.
-
Credit damage if missed payments – Just one 30+ day late payment can significantly hurt your credit score.
-
Possible prepayment penalties – Some lenders charge you extra for paying off the balance early.
-
Lower income – Monthly payments take away money that could be used for other expenses.
Alternatives to Consider
While disability loans can be helpful in many cases, they aren’t the only option. Here are a few other ways to get financial assistance:
-
Advance on disability benefits – In certain urgent cases, the Social Security Administration may provide an emergency advance payment of your benefits.
-
Borrow from family/friends – People close to you might be willing and able to lend money without interest charges.
-
Credit card cash advance – If approved for even a small credit limit, you can use cash advances from the card.
-
Assistance programs – Federal, state, and local programs provide help with housing, medical care, food, and other basics.
-
Crowdfunding – Sites like GoFundMe allow you to request small donations from a large number of people.
Key Takeaways
-
Getting approved for a personal loan while on disability is possible with decent credit and manageable debts.
-
The funds don’t impact your benefit amount, but could count against SSI resource limits.
-
A loan provides flexible money fast, but also comes with interest, fees, and credit risks.
-
Explore all alternatives before deciding if a disability loan is your best option.
I know from personal experience that getting funds quickly during a hardship can be extremely helpful. But loans also take away future income you could use on necessities. Consider both the pros and cons carefully before making a decision.
How Disability Loans Work
Disability loans work much like other personal loans, but with a specific focus on catering to the needs of individuals on disability income. The loan amount you can qualify for typically depends on your disability income and your ability to repay the loan. Just like any other loan, lenders will assess your financial status, including your monthly income from disability benefits, any other sources of revenue and your expenses. Based on this evaluation, a suitable loan amount is determined.
Interest rates for disability loans can vary from individual to individual. Some might offer competitive rates, especially if they cater exclusively to the disabled community. Others might be on the higher side, particularly if you have a less favorable credit history.
Repayment terms are also equally diverse. Typically, short-term loans come with a faster repayment schedule, while long-term loans offer extended grace periods and smaller monthly payments.
Many lenders focusing on disability loans try to address the unique challenges faced by people with disabilities, whether it’s sudden medical expenses, modifications to a home or other unforeseen costs. Hence, the application process, loan structure and customer support are often designed to be more accommodating and empathetic to these needs.
How To Apply for a Disability Loan
Applying for a disability loan can be streamlined by understanding the process and having all the necessary documentation ready. Here’s a step-by-step guide to ensure a smooth experience:
- Gather necessary documents: Begin by collecting all necessary documents. These typically include identification, proof of disability and income verification, such as benefit statements or direct deposit records.
- Research lenders: Evaluate various lenders to identify those offering terms that align with your financial capacity and needs. Consider interest rates, repayment terms and customer reviews to choose a reputable lender.
- Check credit report: Review your credit report for any discrepancies or areas for improvement on your credit score. Some lenders require a credit check, so being aware of your credit report beforehand can be advantageous.
- Complete application: Fill out the lender’s application form. This can often be done online, making the process more accessible and quicker. Ensure all information provided is accurate to avoid any delays.
- Await approval: Once the application is submitted, the lender will review it and conduct any necessary credit and verification checks. If approved, be sure to thoroughly review the loan agreement before accepting.
To ensure a smooth application experience, you should be prepared to provide detailed information about your disability and financial situation. Additionally, be wary of lenders offering terms that seem too good to be true to avoid potential scams or unfavorable loan terms. Always make sure the lender is reputable and has positive reviews from previous borrowers.
How Do We Deal With Debt While On Disability?
FAQ
Will getting a loan affect my disability benefits?
Can disabled people get a loan?
What kind of loan can I get on SSI?
What is a hardship loan?
Can I get a loan while on disability?
Yes, you can get a loan while on disability. Loans aren’t considered an income source. For this reason, getting a loan won’t affect your eligibility for disability benefits. However, it can affect how much you receive per month. Funds you don’t spend in the month you borrow them count toward the next month’s SSI resource limit.
How do I get a personal loan if I have disability?
If you’re receiving disability benefits, applying for a personal loan is the same as for anyone else. Compare lenders. Start your search by comparing lenders, including online lenders and your local bank or credit union. Do a prequalification to see if you qualify for a loan before applying and doing a hard credit check. Apply for a loan.
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.
Where can I get a loan on disability?
You can get a loan on disability anywhere that offers personal loans as long you meet the lender’s loan qualifications. Numerous banks, credit unions and other lenders offer personal loans. If you have limited mobility, you can apply for a loan from the comfort of your home by using an online lender.