In some cases, getting government disability benefits can take a long time, and getting a disability loan can be a good way to get money while you wait for that.
However, disability loans can be risky, and these loans aren’t right for every person who needs them.
There are a lot of things to think about before applying for a disability loan. You should know what a disability loans is, who is eligible, and what factors make it good or bad for your finances.
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What Is A Disability Loan?
A disability loan is a type of personal loan that you can use to cover necessary, everyday expenses such as groceries, bills, or mortgage payments if you are unable to work due to a disability.
These loans are intended to be used as a bridge loan during the few months it takes for the Social Security Administration (SSA) to process your application, and they are not intended to be used in terms of disability benefits.
Types of Disability Loans
If you plan to apply for a loan while on disability, it is important to know why you need one. Here are a few possibilities.
Mortgage Loan
Long-term or permanent disability benefits may help you get a mortgage. If you have a disability, you may be eligible for additional benefits when applying for a home loan.
It is possible to have the VA loan funding fee waived if you are an eligible disabled veteran.
Single-family housing direct loans are another option for low-income families where the government pays a portion of the mortgage payment.
There is a limit to how long you can expect to receive short-term disability benefits. If you don’t have any other sources of income, your mortgage application may be rejected.
It’s possible that the mortgage lender will consider your regular income in addition to your disability income if you’re still working and can show that you will be able to return to your previous job once your disability benefits expire.
Personal Loan
Paying off medical debt or purchasing an engagement ring are just two examples of how a personal loan might be put to good use. Most of these loans do not necessitate a collateral deposit.
You must meet the lender’s minimum credit score in order to get an unsecured personal loan while on disability.
You’ll also have to show that you can afford to pay for the new loan on top of any other debt you already have.
As a disabled person, you’re entitled to a very low income, so this can be a problem. As a result, there isn’t much room for additional debt.
Medical Loan
You may have seen a brochure for medical loans at the reception desk of your doctor’s office or dental clinic. Medical expenses can be covered with these types of loans.
They frequently have low interest rates and terms that make it possible to make payments that are within most people’s means.
There are no special considerations for people with disabilities when applying for a job, and the application process is the same for everyone.
It’s a snag that most medical loan interest is deferred. When a promotional period ends, you will be charged interest on any remaining balance on the loan, even if you’ve already paid it in full.
If you receive federal disability benefits, you will be eligible for Medicaid, Medicare, or both, depending on your income.
Backdated coverage is available in some states, but it is not available in all states. Before you apply for a medical loan, you might want to look into these other possibilities.
Disability Loan
When a person becomes disabled, they may seek out a loan to cover the time it takes for them to begin receiving benefits from the government.
With a personal loan comes responsibility, so proceed cautiously. This type of loan has a short repayment period and can be expensive.
Defaulting on the loan is a real possibility if the disability claim process takes longer than expected. In the event that your disability claim is denied, you will still be responsible for the loan repayment.
Find out if you are eligible for emergency disability assistance before taking out a short-term loan for an anticipated disability.
If you qualify for SSI, you may be eligible for expedited benefits. Get in touch with your local unemployment office to find out more about your options.
Payday Loan
Short-term loans with high interest rates are known as “payday loans.” If you can, avoid taking out these loans.
The vast majority of payday loan borrowers are unable to pay back their loans in full by the due date.
Then you’ll have to pay additional fees when you have to extend the loan and take out another one. It’s a good idea to look for alternatives before deciding to accept a quick, easy payday loan.
Auto Loan
Your car serves as collateral for an auto loan. The collateral can be seized if you default on your loan.
You don’t have to jump through hoops to get an auto loan if you’re disabled. Most financial institutions conduct a simple credit check to determine if you are eligible for a car loan. Some will also ask for proof of your earnings.
Pros and Cons of Disability Loans
As with any financial product, disability loans have a number of pros and cons.
Disability Loan Pros
Disability loans that can be approved quickly may help you get money quickly, but they may not be the best choice for you.
It can sometimes be quick and easy to fill out a short application and find out if you’re approved in just a few minutes.
Getting a disability loan, which is like a personal loan, may help until you get benefits, as long as it has terms and costs you can handle and you’re sure you can pay it back.
Disability Loan Cons
There are a lot of things that can go wrong with disability loans, starting with the terms that come with many of them.
You may be able to get a disability loan even though you no longer have a steady income. Some lenders may be able to lower their risk by giving you short repayment terms.
There is a chance that even though you get the money you need, you might have to pay it back far more quickly than when you were working.
Lenders may offer personal loans with high interest rates to protect themselves when they loan money to you while you’re out of work.
They may also charge you a lot of money for loan origination fees or other fees. Costly fees and high interest rates make it easy to get into debt quickly, which can be dangerous if you’re not at work at the time.
Who Qualifies For a Disability Loan?
Approval of your disability loan depends on the lender and your credit history. Lenders have different criteria for determining who is eligible for loans.
Most lenders will allow you to apply for a loan with a co-signer if you don’t meet the criteria. An important factor in determining your interest rate is the strength of your credit history.
Disablement loans are not handled by the SSA in the same way as disability benefits. Instead, a private lender handles loans for people with disabilities.
Taking out a payday loan should only be a last resort, with a repayment strategy in place to cover the entire balance.
It’s possible that the government will reject your claim for disability benefits, so don’t rely on them to pay off your loan.
Make sure you’ve already applied for disability benefits through the Social Security Administration (SSA) before applying for a loan, as these are only temporary fixes and not long-term solutions.
How To Apply for a Disability Loan?
A disability loan can be obtained from an online lender, a bank, or a credit union.
The application process with an online lender is typically completed entirely online, and it can be the quickest and most convenient way to get the money you need.
If you’re a member of a credit union or have previously used a particular bank, you should check to see if they offer discounted fees or rates to their customers.
Before applying for a disability loan, compare lenders to find the best deal for your financial situation.
Many online lenders now provide pre-qualification tools that allow you to check if you meet the eligibility requirements before applying, allowing you to avoid a hard credit check on a loan you may not be eligible for.
Disability Loan Alternatives
Make sure you do your homework before taking out a disability loan.
Disability Insurance
Having short- or long-term disability insurance from your employer may be a good idea in the event that you become unable to work.
Check out the policy’s terms to see if there are any exclusions or limitations on coverage for pre-existing conditions. Disability insurance can be purchased privately as well.
Government Assistance
Supplemental Nutrition Assistance Program (SNAP), subsidized or public housing programs, presumptive disability and blindness payments, and Temporary Assistance for Needy Families (TANF) may assist you in meeting your basic needs.
Cash Advances
A credit card cash advance allows you to borrow money against the available credit on your card in order to get immediate access to funds.
In order to make an informed decision about whether or not to take out a cash advance, you should consider all the costs and fees associated with it and compare interest rates between your credit card cash advance rate and any available disability loans.
Short-Term Loans From Family or Friends:
It’s possible to get a better deal on a personal loan from a family member or friend than you would on a disability loan from an institution.
Related Question And Answer
What kind of loan can I get on disability?
While meeting the criteria for a conventional mortgage may be difficult, other types of mortgages, such as VA, USDA, and FHA mortgages, are available to those receiving SSDI or SSI benefits.
Disability benefits are frequently accepted as income for these types of home loans. Auto loans are also very popular.
Can I get a loan on my disability check?
Yes. You can get a personal loan while on disability if you qualify. Expect your credit to be checked by the lender.
You may be required to have a certain credit score or a certain debt-to-income ratio, and your lender will almost certainly require proof of income.
How can I get a disability car loan?
How to Get a Car Loan While on Disability Income
- Step 1: Assess your creditworthiness objectively.
- Step 2: Add up any income outside of your disability.
- Step 3: Determine how large of a loan you need.
- Step 4: Consider a co-signer.
- Step 5: Submit your applications to lenders.
Will getting a loan affect my disability benefits?
HOW DOES A LOAN AFFECT MY SSI BENEFIT? The value of the cash or item you receive is not income and does not reduce your Supplemental Security Income (SSI) benefit if you enter into a valid loan agreement.
Bottom Line
If you decide that a disability loan is the best option after considering all of your options, make sure you have a solid plan in place and the funds to pay off the loan.
It’s also crucial that you do your homework to find the lender who can provide you with the best rates and terms for your financial needs.
