When you lose a loved one, the last thing you want to think about is how you’ll pay for the funeral services, but funeral homes don’t come cheap. You may need financing if you don’t have the cash to pay for the funeral outright.
If you have bad credit, it can feel impossible to get funding fast enough to receive services, but there are several options to help you in your time of need.
What Credit Score Do You Need For a Funeral Loan?
There aren’t loans meant specifically for funerals, but you can use several types of loans to cover funeral expenses. With most loans, the higher your credit score is, the higher your chances are for approval, but for funeral loans with bad credit, you can usually get approved with scores in the low 600s.
How do Funeral Loans Work?
Funeral loans are personal or secured loans that provide cash in exchange for collateral. For example, payday loans use your paycheck as collateral, and title loans use your car. Other loans, such as personal or peer-to-peer loans, may not require collateral but will require regular monthly payments.
Options for a Funeral Loan With Bad Credit
When you need to cover funeral expenses, applying for loans can feel pretty scary if you have bad credit. Personal loans are usually not an option because they require good credit. Fortunately, there are options to get you through this difficult time, even with a poor credit history.
Peer-to-Peer Loan
A peer-to-peer loan is like a personal loan, but instead of coming from a bank, it comes from investors who operate as online lenders. These investors invest money in people they know need help and who meet their qualifications. Some investors may be willing to invest in people with bad credit and debt, while others may stick to less risky borrowers.
Peer-to-peer lending platforms connect borrowers with investors willing to lend money. The platform ranks borrowers by their level of risk, which considers their credit score, total debt, and income. The higher their risk, the higher the interest rates investors will usually request.
Crowdfunding
Crowdfunding isn’t a loan but the result of the goodwill of people you know and some you may not. It’s a popular way to raise money for people experiencing a tragedy, and thanks to social media, it can be shared with a large audience in a short amount of time.
You don’t have to worry about repayment terms with crowdfunding; however, the platform hosting the fundraiser will likely take a cut of the donations as a service fee.
Payday Loan
A payday loan is a loan to get you in between paydays. Lenders consider your income from your pay stubs and loan you money based on what you can repay on your next payday. The interest rates are typically very high, and the turnaround is short. If you can’t repay the loan on your next payday, the lender may carry it over to the next one, but you’ll pay excessive fees and interest to do so.
Auto Title Loan
An auto title loan is a type of secured loan. It uses your car as collateral. They are good for emergencies, such as funeral expenses that you cannot cover.
With a title loan, you exchange the vehicle’s title for the funds. Lenders pull your credit but don’t require a minimum credit score. Instead, they focus on the car’s value and how much you owe on it (if anything).
You can often borrow up to 70% of the car’s value with loan amounts up to $50,000. They are short-term loans but have a longer repayment period than payday loans and require monthly payments that include interest. However, when you borrow a title loan, you do not have to give up your vehicle. You can still drive it like you normally would and have the funds to cover the funeral costs.
How Much Can I Borrow With a Funeral Loan?
How much you can borrow to ease the financial burden of funeral expenses depends on your loan type. Here are the general limits, but shop around with different lenders to determine how much you can get:
- Peer-to-peer loans: $1,000 – $50,000
- Payday loan: $500 – $1,000, depending on where you live
- Auto title loan: $500 – $50,000
Remember, you should never borrow more than you can afford to repay, and each loan option will require you to pay interest. Most loans for people with bad credit don’t have competitive interest rates, so the interest charges can greatly increase your monthly payments.
Is Securing Funeral Loans Challenging?
Securing funeral loans can be challenging if you look in the wrong places. Since time is of the essence, it’s important to be honest about your financial situation so you look in the right places. For example, banks require great credit for personal loans, so wasting your time there doesn’t make sense.
Instead, consider online lenders, credit unions, payday and title loan lenders. When applying for these loans, compare your options, including:
- Interest rates: Are they fixed interest rates, or are they variable?
- Origination fees: What fees is the lender charging?
- Repayment terms: How long can you take to repay the loan?
- Prepayment penalties: Are there fees if you repay the loan early?
What is the Average Cost of a Funeral?
According to the National Funeral Directors Association, the average funeral with casket and burial costs $8,300, and with cremation and an urn, it costs $6,280. This amount fits within most of the loan options here, but of course, there are other expenses, such as viewing, transport, religious services, and meals.
Alternative Options to Funeral Loans
A loan for funeral expenses can feel intimidating and isn’t always the right answer. Consider the following alternatives to cover the funeral home services:
- Life insurance: If your loved one has life insurance and you are a beneficiary, you can file a claim for the payout. Ask the life insurance company how long the payout may take so you can plan accordingly for the funeral expenses.
- Credit card: If you have any credit cards with enough room, you can charge the expenses or at least some of them. You may even apply for a credit card with a 0% APR, but you typically need good credit to get approved. If you have someone who can cosign for the card with you, it can be a great way to save on interest costs.
- Ask the funeral director for a payment plan: It never hurts to ask the funeral home director if they offer any financial plans or support. You may be able to break up the payments after making a down payment and save money on interest costs and other fees.
Can a Burial be Financed?
If you have the money for the funeral service but not the burial, you may be able to finance it. Sometimes, the cemetery offers financing directly through them, and other times, you must get a loan from another source and pay the cemetery in cash.
Final Thoughts
Getting a funeral loan with bad credit is possible, and you may even get funding the same day. At Montana Capital, we fund loans quickly, helping you through your time of need. All that’s required is a vehicle with collateral and your name on the title, along with proof of some type of income (not just employment) to prove you can afford the loan.
If you’d like to learn more about how title loans work, contact us today!
Written by
Samantha Hawrylack
Samantha Hawrylack writes for our company and is an expert in personal finance. Sam received her Bachelors of Science in Finance and her Masters in Business Administration from West Chester University of Pennsylvania. She began her career in the financial services industry and shifted to an entrepreneurial role where she could directly impact clients. Sam has an impressive background in personal finance and business management.