At some point, you may find yourself faced with the prospect of paying for a loved one’s funeral when there are no funds set aside for this purpose. One financial tool that you may be evaluating is a funeral loan.
What is a funeral loan?
A funeral loan is a personal loan that is used to pay for funeral or burial expenses. This type of loan is not specially designed to accommodate funeral or burial expenses. Instead, the funds can be used at your discretion. However you decide to use them, you are responsible for repayment at the terms specified in the lending agreement. Personal loans are available through banks, credit unions, and other alternative lenders.
Funeral Loans: Advantages
The biggest advantage to funeral loans is that they are readily available and funds can be secured quickly. You can spread payments over time, and with a fixed payment your monthly expenditures will be predictable.
Depending on the terms of the specific loan, you can likely pay the loan off early will no penalty. Because they are personal loans, funeral loans do not typically require collateral. Instead, they are granted based on your good credit or track record with the lending agency.
Funeral Loans: Disadvantages
Personal loans can carry very high interest rates. Since they are normally unsecured, the lending agency will require a greater return on their investment.
This type of loan is granted based on your creditworthiness. That means that they are among the most difficult type of loan to secure. Another factor that makes this type of loan more difficult to get is the fact that it will be used for a service that cannot be repossessed for non-payment. While you may be able to get a funeral loan despite having poor credit, it will carry a higher interest rate.
Whether or not using a personal loan for funeral expenses is right for you is a decision that should be weighed carefully. Many financial experts believe that is it unwise to finance items for which you will see no long-term benefit. Of course, your personal circumstances will affect whether or not this type of financing is a good idea.
To learn more about how to get a personal loan to cover funeral expenses, talk with your financial institution or your funeral director. The funeral home may have an arrangement with a lender who offers this type of financing. If you search on the term “funeral loans” on the Internet you will find many alternate lenders who provide this type of financing. Be sure that you understand the full terms of the loan before you enter into an agreement. If you have a financial advisor you should discuss this option with him or her before deciding to commit.