Disability loans | The bank rate

Disability loans can be useful tools to help bridge the financial gap between applying for government disability benefits and getting approval, which in some cases can take months. However, loans for people with disabilities come with some potential risks and these loans are not suitable for everyone.

If you are considering applying for a disability loan, you need to know what it is, who is eligible, and the factors that will make it beneficial or not for your financial situation.

What is a disability loan?

A disability loan is a personal loan that you can use for necessary daily expenses like groceries, bills, or mortgage payments if your disability has made you unable to work. These loans are used as a short-term funding tool for the few months it takes for the Social Security Administration (SSA) to process your application, and they should not be used to replace disability benefits.

Emergency advance payments

Before applying for a disability loan, find out if you qualify for an emergency prepayment. The SSA provides advanced disability benefits to qualified individuals based on the severity of their condition, type and likelihood of being approved for disability benefits. Also known as deemed disability or blindness payments, they are used to help fund the gap of up to six months between application and approval in emergency situations. Unlike loans for people with disabilities, they only have to be repaid in the event of an overpayment and have no interest rate.

You will need to prove that you are currently in an emergency to qualify, and payments will be refunded by subtracting the amount of the emergency advance you received from the amount you are expected to receive in the event of disability.

If you cannot qualify for emergency early placement, you may want to consider disability loans.

Who is eligible for a disability loan?

Because a disability loan is a personal loan, approval will be based on the lender and your financial history. The eligibility requirements vary from one lender to another. If you don’t meet the requirements, most lenders will give you the option to apply with a co-signer to increase the chances of approval. Your interest rate will also be determined by your credit history, so the better the score, the lower the interest rate.

Disability loans are not treated by SSA like disability benefits. Instead, loans for people with disabilities go through a private lender. Therefore, they should only be taken out as a last resort and if you have a repayment plan in place to pay off the balance. Keep in mind that it may not be the best idea to rely on disability benefits to pay off your loan, as the government may deny your application.

Before applying for a loan, make sure that you have already applied for disability through SSA, as loans are a short-term solution, not a long-term solution.

How does the government determine who is eligible for a disability?

After completing the online application, the SSA determines who is entitled to disability benefits using a process that takes 3 to 5 months and includes the following five questions:

  1. Do you work? If you are currently working in 2021 and your average monthly income is over $ 1,310, you probably will not be considered disabled.
  2. Is your condition considered “serious”? To be eligible, your condition must be severe enough to limit your ability to work and perform basic work-related physical tasks for at least 12 months.
  3. Is it in the list of disabling conditions? The SSA has a list of medical conditions that are considered eligible for disability benefits. If your condition is not listed, it is up to the SSA to decide whether the condition is considered serious enough to qualify.
  4. Can you still do the job you used to do? If you can still complete your work with your medical impairment (s), you are not considered eligible.
  5. Do you have the capacity to do any other type of work? If you are rendered unable to work, the SSA will take into consideration factors such as your age, health, education, and past work experience to determine if you have the capacity to work at another job. Otherwise, you may be eligible for benefits, but if there is other work that you could successfully complete, you may be refused.

How to apply for a disability loan

You can apply for a disability loan through an online lender, bank, or credit union. With an online lender, the application process is usually done entirely online and can be the fastest and easiest way to get the money you need. However, if you are a member of a credit union or have used a certain bank before, you might want to see if that financial institution offers fees or reduced rates to its customers.

Compare lenders before applying for a disability loan to find the best deal for your financial situation. Many online lenders now offer prequalification tools that let you see if you meet the eligibility requirements before applying to help you avoid a credit check on a loan you might not be on. eligible.

Pros and Cons of Disability Loans

While any type of emergency loan can be a useful way to quickly get the cash you need when you need it, there are always downsides to be aware of before applying.


  • Convenience: With some lenders, you could get approved in minutes and complete the entire application process from your home.
  • Options: There are a plethora of lenders, banks, or credit unions to choose from when it comes to finding a loan that’s right for you.
  • Quick relief: If you can’t work and wait for your application to be processed, disability loans fill this gap.

The inconvenients

  • Potentially high interest rates: Depending on your credit, you could end up with a high rate, which could lead to high interest rate debt down the road.
  • Payday risk: Many payday loans are for people with disabilities, but they usually come with astronomically high interest rates that can keep you in debt for years.
  • Short repayment terms: Depending on the lender, you may benefit from a shorter repayment period, which means you might have a larger monthly payment with a shorter repayment term than with other types of debt.

Alternatives to a disability loan

If you do not meet the eligibility requirements or do not wish to take out a long-term loan, you have alternatives to help you finance the processing time of your disability application:

  • Government assistance: This includes programs such as cash assistance, SNAP, social assistance and unemployment benefits. You can apply for government assistance and see if you qualify with your state’s social service or social service agency.
  • Workers compensation: If you suffer from an occupational injury or illness, you may be eligible for Workers’ Compensation. The process for filing a claim can differ from state to state, so research the process and follow all the necessary steps. In addition, depending on your state’s regulations, you may be entitled to additional disability benefits if your injury has made you unable to work.
  • Cash advances: A cash advance is a short-term loan that allows you to use your credit card to borrow the money you need. This can be done at an ATM or through a bank that offers cash advances. Cash advances are a form of credit card debt, and the money you borrow will need to be paid back.
  • Disability insurance: Disability insurance pays part of your income if you are disabled and unable to work. There are two forms: short and long term, which come with different coverage amounts and waiting periods. You may be able to purchase an employer sponsored plan or purchase an individual plan from an insurance broker or company.
  • Loans from families or friends: As a last resort, you can ask a trusted friend or family member to lend you money for your necessities. If you choose this method, keep in mind that it could lead to relationship breakdowns if you are not able to repay them as promised.

At the end of the line

After considering all of your options, if you decide that a disability loan is the way to go, make sure you have a solid plan in place and the money to pay off the loan. It’s also important to make sure you do your research to find the lender who offers you the best rates and terms for your financial needs.

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