At a Glance

Living with a disability presents many challenges, but finding benefits that can assist with day-to-day life can make all the difference. A personal loan for people on disability benefits can enhance the assistance a person receives. Learn everything there is to know about loans while on disability in order to see if this option could benefit you.

In this article, you’ll learn:

What is a disability loan?

A disability loan is a personal loan where the funds are put towards side effects or treatments for someone living with a disability. Disability loans often have the same loan terms as personal loans, which means they can range in amount from $1,000-$100,000. On average, these loans have an interest rate that ranges from 6%-36%, with a term lasting anywhere from two to seven years.

Who qualifies for disability loans?

The qualification criteria for a disability loan are the same as that for a personal loan. This means that, in general, a person should have a credit score above 620 for the best chance of approval. Additionally, a person’s financial history and stream(s) of income will play a role in the approval, but specific terms for approval will vary from lender to lender.

How does the government determine who qualifies for disability?

A personal loan for disabled person(s) is not the same as disability benefits. Disability benefits are issued through the Social Security Administration and are not loans. While a loan for disabled person(s) will not require proof of disability, it is still worth covering how the government qualifies who is eligible for disability benefits.

The government qualifies a person with a disability as someone who cannot do work or engage in substantial activity as a result of their medical condition. If the disability results from something later in life, a person who cannot perform the work they did previously or adjust to new work would be qualified as having a disability.

What are the types of disability loans?

If you’re in need of financing to support your needs in addition to the disability benefits you receive, there are a number of options that may be available to you. While personal loans are the most commonly used form of disability loans, there are other financing options you might want to consider. With any type of financing, it’s important to remember that you will be required to make timely payments to return what you borrow. If you aren’t able to make the monthly payments or pay back the loan within the loan term, you may need to look for assistance elsewhere.

1. Personal loans

As mentioned above, personal loans for people living with a disability are the primary choice to consider. With interest rates starting as low as 6% and amounts ranging as high as $100,000, personal loans can be a good option if you have excellent credit. However, if you have poor credit, you may need to consider an alternative option, as you may not qualify for a personal loan or may qualify with unfavorable terms.

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2. Auto loans

While auto loans are most often used to purchase a vehicle, they can be used for other purposes, such as to supplement disability benefits. These loans use your vehicle as collateral when you borrow money. Due to the presence of collateral, they can provide access to a large sum of money at a low interest rate. Keep in mind, however, that should you default on the loan, your vehicle may be repossessed.

Related: Personal Loan Vs Auto Loan

3. Home Equity Loans or HELOCs

A home equity line of credit or home equity loan allows you to borrow funds against the equity you have in your home. For example, if your mortgage was for $1,000,000 and you have paid off $300,000, that is your equity in your home. A home equity line of credit or loan could allow you up to borrow 50%-75% of the equity you have. Of course, this is only an option for those who own their home and have equity in it. However, if that’s you, you may be able to borrow a significant sum at a relatively low interest rate, ranging from 6.24% – 8.82%.

4. Payday loans

As a last resort, taking out a paydown loan can be an option to consider for some. With smaller loan amounts targeted towards emergency expenses, a payday loan must be repaid by your next payday, hence the name. Given the astronomically high fees, often equating to 100%-400% APR, payday loans should only be used as a last resort and if you will have the funds needed to repay the loan in a matter of weeks.

5. Medical loans

For some people with disabilities, taking out a medical loan may be preferable to a personal loan. If you recently suffered from an event that caused your disability and have ongoing medical expenses, a medical loan can provide you with larger loan amounts targeted toward that category of expenses. Some service providers, such as hospitals and care centers offer these types of loans or payment plans that can help you afford medical expenses.

Compare: Medical Loans

How to apply for a personal loan with disability benefits

When applying for a loan with disability income, the process is the same as if you were going to apply for a standard personal loan:

  • Select the amount of money you need based on the purpose of the loan.
  • Reach out to different lenders to see what terms can be offered. This may include a preapproval process, where you can receive personalized terms you can compare across lenders.
  • Apply for the loan by submitting personal information such as SSN, income information, including any disability benefits you’re receiving, and more.
  • Review the loan agreement carefully and sign it.
  • Receive your funds and begin repayments.

Learn more: How to apply for a personal loan?

Pros and cons of personal loans for people on disability

When considering whether or not to take out a personal loan, there are a number of pros and cons to consider. The most notable pros associated with a personal loan for disability include:

  • Quick access to cash
  • A lump sum of money upfront
  • Lower interest rates than other lending types, i.e., credit cards.

However, there are a number of drawbacks to taking out a personal loan that should make anybody think twice before settling on a lender:

  • Loans for disabled persons with bad credit may not come with favorable interest rates
  • Monthly payments may be higher than you are wanting to pay
  • Taking on more debt may cause major financial struggles

Loans for people on disability with bad credit

Securing funding when you have bad credit can seem difficult. While lenders do offer personal loans for people with bad credit, they often come with higher interest rates and lower borrowing amounts, which may not meet your needs. If you have poor credit, consider working on improving your credit before applying for a loan. If you need access to cash quickly, you can also consider applying for a loan with a cosigner who has excellent credit, which can improve your chances of approval.

Will a personal loan affect disability benefits?

How a personal loan affects your disability benefits depends on the type of benefits you are receiving. The Social Security Administration (SSA) does not consider a personal loan to be income, so it will not impact Social Security Disability Insurance (SSDI). However, if you are receiving Social Security Income (SSI), it can count towards your resource limit if you do not spend it in the same month you receive it. In this case, you may not receive SSI during the months when you retain the loan funds.

Alternatives to disability loans

In some cases, a personal loan for disability may not be the right choice for you. Alternatively, you might consider:

  • Using a credit card for smaller disability-related expenses that you can pay off in full at the end of the month.
  • Reaching out to SSA regarding your disability benefits amount.
  • Taking out a line of credit.
  • Government assistance

FAQs

In most cases, the best loan for a person on SSI with good credit is a personal loan. This is because it offers the most flexibility in loan amount and terms. With amounts ranging from $1,000 to $100,000, a personal loan can be used for nearly any purpose, including medical expenses, rent, bill payments, and more. Keep in mind that if you do not use the funds in the same month you receive them, you may impact your SSI benefit amount.

If you do not find yourself with enough money from a disability check, consider reaching out to the SSA to discuss options regarding your benefits. Additionally, you may be eligible for additional support through other government programs for essential needs, including medical expenses, food, and housing. It’s worth looking into both national and local government programs for people with disabilities to learn what additional benefits you may qualify for.

A social security deposit is directly deposited into your bank account, which means there’s no risk of losing it. However, if the government has determined that you no longer have a disability, they may stop deposits. Additionally, if you are receiving Social Security Income (SSI), you may lose your benefit if your income or resources increase.

On average, if medical improvement is expected, your case will be reviewed within 6 months to a year and a half. In some cases, for longer-term disabilities expected to be recovered from, the condition will be reviewed every three years on average.