Disability Loan | Bank Rate

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A disability loan is a useful tool that helps bridge the financial gap between applying for and getting approval for government disability benefits. In some cases, it may take several months. However, disability loans have potential risks and these loans are not suitable for everyone.

If you are considering applying for a disability loan, you should be aware of what they are, who qualifies, and the factors that favor or disfavor your financial situation.

What is a disability loan?

A disability loan is a personal loan that can be used for necessary everyday expenses such as groceries, bills, and mortgage payments if you are unable to work due to your disability. These loans are used as a short-term funding tool, which takes several months for the Social Security Administration (SSA) to process applications. It cannot be used as a substitute for disability benefits.

emergency prepayment

Before you apply for a disability loan, check to see if you qualify for an emergency prepayment. SSA provides severe disability benefits to eligible individuals based on the severity, type of condition, and likelihood of being approved for disability benefits. Also known as presumed disability or blindness payments, they are used to fund gaps of up to six months between application and approval in emergency situations. Unlike disability loans, they only have to be repaid in case of overpayment and have no interest.

To qualify, you must demonstrate that you are currently in an emergency. Payments will be refunded at the amount you would have received at your disability minus the amount of any Emergency Advance Payment received.

If you don’t qualify for emergency preplacement, consider a disability loan.

Who is eligible for a disability loan?

Disability loans are personal loans, so approval is based on the lender and your financial history. Eligibility requirements vary by lender. If you don’t meet the requirements, most lenders will give you the option to apply for a co-signer to increase your odds of being approved.

Disability loans are not processed through SSA like disability benefits. Instead, disability loans are made through private lenders. Therefore, they should only be used as a last resort and if you have a repayment plan to pay off the balance. Be aware that relying on disability benefits as a way to pay off a loan may not be the best idea as the government may deny your claim.

Before applying for a loan, make sure you have applied for disability through SSA. A loan is a short-term solution, not a long-term solution.

How does the government decide who qualifies for disability?

Once you complete your online application, SSA uses a process that takes three to five months to determine who qualifies for disability benefits, including five questions:

1. are you workingIf you are currently working in 2021 and have an average monthly income of over $1,310, you may not be considered disabled.?
2. Is your condition considered “severe”To be eligible, you must have been in a condition so severe as to limit your ability to perform tasks related to work or basic physical exertion for at least 12 months.?
3. Are you on 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 SSA to determine if your condition is considered serious enough to qualify.
4. Can I continue to work as before?You are not considered eligible if you are able to complete the job despite your medical disability.?
5. Do you have the ability to do other types of workIf you are unable to work, SSA will consider factors such as age, condition, education and previous work history to determine your ability to take another job.? If not, you may be eligible for benefits, but may be denied if you have other jobs you can do well.

How to apply for a disability loan

You can apply for a disability loan through an online lender, bank, or credit union. With online lenders, the application process is usually completely online and is the quickest and easiest way to receive the cash you need. However, if you are a member of a credit union or have previously used a particular bank, it is a good idea to check if that financial institution offers discounted or discounted rates to its customers. .

Compare lenders before applying for a disability loan to find the best offer for your financial situation. Many online lenders now offer prequalification tools that allow you to check if you meet the eligibility requirements before applying, helping you avoid harsh credit checks for loans that you may not qualify for.

Pros and Cons of Disability Loans

Emergency loans of all kinds are a convenient way to quickly get the cash you need when you need it, but there are still drawbacks that you should be aware of before applying.

Strong Points

• comfortable: Some lenders allow you to get approval in minutes and complete the entire application process from home.
• option: There are many lenders, banks, or credit unions to find the right loan for you.
• quick relief: If you are unable to work and are waiting for your application to be processed, a disability loan fills the gap.

Cons

• Potential for high interest rates: Depending on your creditworthiness, you may be stuck with high interest rates, leading to high interest debt in the future.
• payday risk: Many payday loans are marketed to people with disabilities, but they usually come with astronomically high interest rates that leave you in debt for years.
• short repayment terms: Depending on the lender, the repayment period may be short. This means that you may have a shorter repayment period and higher monthly payments than other types of debt.

Alternatives to disability loans

If you don’t meet the eligibility requirements or don’t want to take long-term loans, there are alternative ways to fund the processing time of your disability application.

• government aid: This includes programs such as cash assistance, SNAP, welfare and unemployment benefits. You can apply for government assistance and see if you qualify for state welfare or social service agencies.
• worker’s compensation: If you are injured or sick on the job, you may be eligible for workers’ compensation. The process for filing a claim may vary by state, so research the process and complete all required steps. Also, depending on state regulations, you may be eligible for additional disability benefits if you are determined to be unable to work because of your injury.
• caching: A cash advance is a short-term loan that allows you to borrow the cash you need using your credit card. This can be done through an ATM or bank that offers prepayment. A cash advance is a form of credit card debt, and money borrowed must be repaid.
• disability insurance: Disability insurance that compensates for part of your income if you are unable to work due to a disability. There are two forms, short-term and long-term, with different compensation amounts and waiting periods. You may be able to sign up for an employer-sponsored plan or purchase a personal plan from a broker or insurance company.
• Borrowing from family or friends: As a last resort, you can ask a trusted friend or family member to lend you money for the essentials. If you choose this method, be aware that if you fail to repay as promised, you may end up with a rift in your relationship.

Conclusion

If, after considering all your options, you decide that a disability loan is the route you want, make sure you have a solid plan and money to pay off the loan. It’s also important to do research to find a lender that offers the best interest rates and terms for your financial needs.

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