Losing a loved one is hard enough without worrying about how you’ll pay for a funeral. If you don’t have enough savings to pay your loved one’s burial expenses out of pocket, funeral loans can help you cover the upfront costs while you pay them back over time. However, there is a lot to consider before you commit to financing a funeral.
Losing a loved one is painful enough without the financial stress of paying for a funeral. With the average funeral costing over $7,000, many families struggle to cover expenses upfront. Turning to loans for funeral costs can provide immediate funding so you can honor your loved one without breaking the bank.
As funeral financing experts, we created this comprehensive guide on loans for final expenses. Read on to learn your options compare pros and cons and make the best choice to cover costs while avoiding debt traps. With the right approach, you can secure affordable financing that aligns with your budget and needs during this difficult time.
Why Funeral Costs Are Rising
Before diving into financing options, it helps to understand why funerals are so expensive these days. The average cost of a traditional funeral with viewing and burial reached $7,848 in 2021, up from $6,971 in 2015, according to the National Funeral Directors Association (NFDA). What’s driving these increasing expenses?
-
High demand for services With over 28 million deaths per year in the US., funeral homes stay busy. High demand allows them to charge more.
-
Limited competition: Most towns have only a handful of funeral homes, limiting price competition. Consolidation in the industry also reduces incentives to compete on cost.
-
Growing feature expectations: Today’s funerals often involve elaborate floral arrangements, premium caskets, limousines, elaborate urns for cremated remains, and other features that raise costs.
-
High overhead: Funeral homes require prime real estate, specialty vehicles, insurance, licensing fees, and more, expenses they pass onto consumers.
With all these inflationary factors, it’s no wonder funeral costs keep rising higher than the rate of inflation. For many families, financing is the only viable option to cover final expenses for loved ones.
Loans Specifically for Funeral Costs
If you need funds fast to cover funeral bills, specialized loans for funeral expenses offer one option. Two major types exist:
Funeral home financing – Many funeral parlors work with lenders to offer on-site financing for their services. This provides convenience, but interest rates can be high.
Independent funeral loan lenders – Specialty lenders like ChoiceMutual offer loans from $2,000-$50,000 specifically for funeral costs. Terms are longer than funeral home financing.
Pros of these options include fast funding and specific use of funds just for funeral expenses. Cons are higher rates and fees compared to alternatives like personal loans. Carefully compare costs before committing.
Personal Loans for Funeral Expenses
Personal loans allow you to borrow a lump sum and use it as you wish, including covering funeral bills. Interest rates start lower than specialized funeral loans, and you can shop national lenders for the best terms.
With online lenders like LendingClub and SoFi, you can prequalify without affecting your credit to see potential loan amounts, rates, and payments. This helps estimate costs before formally applying.
Most personal loans offer funding in a week or less, so they can provide quick access to cover funeral expenses in a time crunch. Just have a plan to repay the monthly payments so you don’t take on excessive debt.
Home Equity Loans or HELOCs
If you have equity built up in your home, tapping it via a home equity loan or HELOC is an option for funding funeral costs. Interest rates are likely to be lower than other financing options.
However, origination fees and closing costs can be expensive, making this less cost-effective for smaller loan amounts. It also puts your home at risk if you fail to repay since the loan is secured by your house.
0% APR Credit Cards
Another outside-the-box option is opening a new credit card with a 0% intro APR offer. As long as you pay off the full funeral costs before the promotional period ends, you pay no interest.
Just be sure you can pay off the balance in time. Otherwise, deferred interest often kicks in retroactively once the intro period ends. We don’t recommend this route unless you’re confident you can be debt-free by the promo end date.
Compare Your Funeral Loan Options
With so many financing choices available, it’s essential to compare options thoroughly before committing to any loan product. Here are key factors to weigh:
- Interest rates and fees
- Loan amount limits
- Payment terms
- Time to funding
- Payoff flexibility
- Impact on credit score
- Collateral required
Creating a simple comparison chart allows you to see all costs and terms side-by-side. Applying for prequalification or preapproval also provides key details so you can make an informed decision.
Tips for Getting Affordable Funeral Loans
If you’ve determined a loan is the best way to cover funeral costs, use these tips to get affordable financing:
-
Check your credit – Improving your score before applying can lower rates. Pay down debts and correct errors.
-
Compare lenders – Whether using a personal loan or specialized product, shop around for the best terms.
-
See if any fees can be waived – Ask lenders if they’re willing to waive origination fees to lower costs. Can’t hurt to ask!
-
Optimize the term length – Longer terms have lower monthly payments but higher total interest costs. Find the right balance.
-
Use a co-signer if available – Adding a co-signer with good credit can help you qualify and get better rates.
-
Automate repayments – Set up autopay from your bank account so you never miss a payment. This prevents late fees and credit damage.
While no loan is stress-free, comparing all your options and negotiating the best terms can help minimize both funeral costs and financing expenses.
Questions to Ask Before Getting a Funeral Loan
To make sure you get the right funeral loan, here are key questions to have answered beforehand:
- How much can I borrow?
- What are the interest rates and fees?
- How long will it take to get funded?
- What are the repayment terms and loan length options?
- Will missing payments damage my credit?
- Is there a prepayment penalty for paying off early?
- Is any collateral required, like my home equity?
Asking these questions upfront prevents surprises down the road. Find a lender willing to provide clear answers about what to expect from their funeral loans.
Honoring Your Loved One Without Financial Hardship
Planning farewell arrangements for someone who has passed is hard enough emotionally without money worries piling on unneeded stress. By exploring your financing options and choosing affordable loans for funeral costs, you can cover expenses smoothly and avoid long-term debt.
With the right planning and research, you can honor your loved one without suffering financial hardship. From personalized loan guidance to companionable customer service, we aim to make financing as worry-free as possible during your time of grieving. Please reach out if we can assist with making final arrangements respectfully and affordably. Your loved one deserves nothing less.
Should you take out a loan to cover funeral costs?
Like any financial decision, taking out a loan for funeral expenses has its pros and cons. Here’s more information on what to consider as you weigh your options:
| Pros | Cons |
|---|---|
|
Provides access to necessary funds: If you can’t afford to pay for funeral costs out of your savings or emergency fund, taking out a loan to cover the cost can help you access the money you need quickly. May help improve your credit score: If you can keep up with your monthly payments, paying back an installment loan can actually help you improve your credit score over time. Can reduce stress: Planning a funeral is stressful in its own right, but applying for a loan can help you stop worrying about where the money is coming from. |
Creates more debt: Taking on more debt can have potentially negative consequences if you’re unable to keep up with your payments, including causing your credit score to drop. May involve paying high interest rates: While bad credit loans do exist, you may be subject to higher interest rates if you have a lower score. Encourages sole responsibility: Unless you apply with a co-borrower, taking out a personal loan leaves you solely responsible for paying it back. If your circle is large enough, it may be worth looking into alternative options, like crowdfunding, where you can share the cost burden. |
What are funeral loans?
At its core, a funeral loan is a personal loan that’s used to cover burial expenses. The funds from these loans can be used to cover the costs of funeral home services, burial and cremation or any other expenses you may incur while putting a loved one to rest.
Like all installment loans, the funds from a funeral loan will be delivered to you in one lump-sum payment. You can then use those funds to cover your loved one’s funeral expenses as you see fit. Then, when your repayment period begins, you’ll repay what you’ve borrowed over a series of regular monthly payments.
Although there are sometimes fees associated with taking out a personal loan, the interest rates are typically more affordable than if you were to charge the same amount on a credit card. Many lenders even offer quick loans that allow you to get same- or next-day funding, if needed.