Understand how to get a funeral loan and how to avoid scams by looking for alternatives
Funeral loans are always tough to talk about. Anyone needing the information probably doesn’t want to think about it, and they shouldn’t have to.
This is why it’s so important to name someone in the family to take care of your funeral costs and other expenses. This should be someone that will be able to take care of the burden.
Unfortunately, that rarely happens so here we are talking about how to pay for funeral expenses.
If you can’t afford a funeral, the first thing people think of are funeral loans. It can be a dangerous type of loan if you don’t understand how to get one with falling victim to the scams. There are alternatives to funeral loans as well and some that can help you pay for final expenses without going into debt.
What are Funeral Loans?
Funeral loans can be a dangerous topic. If you’re looking for a loan to pay funeral costs, you’re probably not in the right state of mind to really think through the options. This means a lot of people fall victim to loan scams, paying sky-high interest rates to loan sites supposedly specializing in funeral loans.
There is no such thing as a funeral loan.
All funeral loans are just personal loans you use to pay funeral expenses. A personal loan is an unsecured loan you pay back monthly at a fixed interest rate and with a fixed payoff date. Most loan sites will allow you to borrow between $1,000 to $40K at rates between 6% to 36% annualized.
The reason why a lot of websites are set up as ‘Funeral Loans’ is because it makes it easier to rank higher on Google for when someone searches for a loan. They know grieving family will click through the first website they see and not shop their loan around for a better rate.
If you’re offered a so-called funeral loan at a 40% interest rate or a personal loan at a 24% rate, does it matter what the loan is called?
How Much do Funeral Expenses Cost?
The average funeral in America costs just under $8,000 according to the National Funeral Directors Association (NFDA). The price will vary quite a bit though depending on cremation vs burial and what services are included.
For example, the average cremation costs $6,708 which helps to explain why use of cremation is rising. Nearly half (45%) of all end-of-life services were cremation last year versus just a third less than a decade ago.
The biggest costs in a funeral generally go to the funeral director, charging upwards of $2,000 for services and use of the funeral home. Casket and the burial site can also reach well past $3,000 on average.
The price of funeral expenses has increased at a 2.5% annual pace over the last ten years, about the rate of general inflation. Costs for a funeral can be much higher than those listed here though if you include travel, meals and lodging for loved ones coming for the services.
Most experts recommend budgeting up to $10,000 for funeral expenses. This is why there’s often a ‘Final Expenses’ benefit on life insurance policies up to that amount.
What Happens when a Family can’t Afford a Funeral?
There is an option available if you cannot afford to pay for a funeral. State and local governments will pay funeral expenses if no family claims a body in the morgue.
You’ll still be asked to confirm the deceased’s identity but will not formally claim the body. You might have to sign a release form with the county coroner that will transfer your rights to the state. After you do this, the state or county will arrange for final expenses.
Understand though, if you do this, it takes away all your rights. Many counties have a policy of cremation for all unclaimed bodies since it’s cheaper and you might not even get the ashes or may have to pay a fee to receive them. Even if the county has a burial policy, it will be in a small grave with an in-earth tombstone.
Websites that Make Funeral Loans
Rather than let the county conduct burial, many people opt for a funeral loan to pay for final expenses. This is where the problem starts because there are a lot of websites claiming to specialize in funeral loans. People assume that they offer the best rates for that type of loan and don’t shop around for anything better.
No matter what your loan, always visit a few different loan sites to make sure you’re getting the best rate. Most websites do a soft-pull on your credit report to pre-qualify you and estimate a rate. This means it doesn’t affect your credit score so there’s no reason not to apply on a few sites.
PersonalLoans.com is the most often recommended among readers and a loan site I’ve used twice for debt consolidation and home improvement. The site works for bad credit borrowers with a minimum credit score of 580 FICO and three different loan options including bank and p2p loans.
SoFi is a good choice for borrowers with higher credit scores. SoFi doesn’t release a minimum credit score but it’s likely around 680 FICO though you’ll get lower rates and no loan origination fee if you qualify.
Upstart offers loans to credit scores somewhere in the middle and specializes in loans to borrowers with limited credit history. The site is especially popular with college graduates with its special lending program that takes education into account.
Other Ways to Pay for Funeral Services
Interest rates on personal loans can reach as high as 36% for bad credit borrowers so you won’t want to pay all funeral expenses with a loan if you can avoid it. I recommend putting everything you can together first and then filling in the gap with a funeral loan.
I understand this might be difficult because funeral costs come without notice and have to be paid immediately. You might also try taking a short-term funeral loan to pay for expenses and then use the two ideas here to pay off the loan early.
The first alternative is to just ask friends and family members to help pay funeral costs. Find one person in the family that is willing to take care of it and have them ask each person separately if they can chip in for costs.
- Don’t get angry or frustrated if someone can’t help pay or doesn’t contribute much. This isn’t a time to start family feuds.
- Make sure the person selected to collect can handle the burden. This is a tough time for everyone.
- The designated person needs to ask everyone individually, including friends and family that could not attend the services. A simple social media post or email isn’t going to work, it has to be a direct ask.
Even if everyone contributes just $30 – $50, it can go a long way to decrease how much you need from a funeral loan.
How to Bury Someone with No Money
Since those funeral costs come so quickly and have to be paid immediately, you may have no choice but to take out a funeral loan first. Borrow only what you need and pay off as much as you can with contributions from family later.
Before opting to use credit cards to pay funeral costs, make sure you compare rates between a personal loan and your cards. Rates on personal loans range from 6% to 36% depending on your credit score so you might be able to get a much lower rate compared to the average 24% charged on plastic.
Applying online for a funeral loan takes less than five minutes and money can usually be deposited in your bank account within a few days. You’ll need to fill out basic information like your name, social security number and employment information. You’ll link your bank account for direct deposit of the loan and monthly withdrawals.
Most loan sites require borrowers have a steady paycheck and make at least $2,000 a month to qualify for a loan. You can borrow up to $40,000 on terms from one- to five-years and payments generally start a month after you get the money.
- Apply for only as much as you need. This will lower your payments and lower amounts come at lower interest rates.
- Apply for the shortest term you can afford. Rates on one-year and three-year loans are lower but make sure you can afford the monthly payment.
- Shop your loan around on at least two or three sites to make sure you get the best rate available.
Paying for funeral costs is never an easy thing to manage. Even if you can afford the funeral, it’s not something you want to think about right now. Don’t fall victim to scam loan sites preying on grieving family and charging sky-high interest. Make sure you use a funeral loan as a last resort and shop your loan around for the best rate available.