Financial Problems: Getting a Disability Loan While Waiting for Social Security

Taking a personal loan can be an option while you're waiting for disability benefits, but you might be able to get a small loan from Social Security.

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If you have a disability and are unable to work, and you're waiting for a disability decision from Social Security, you may be running out of money and looking for a personal loan. Think carefully, however, before you agree to taking on new debt when you aren't assured you'll get approved for disability.

Personal Loans

Personal loans may be easier to get from finance offices, also known as consumer loan offices, than they are to get from traditional lending institutions. Most consumer loan companies are more lenient when it comes to evaluating an individual's prior history of installment and revolving debt payments. Their interest rates, however, are likely to be higher. While the amount of interest paid can be kept fairly small if the loan is paid back soon with an award of Social Security disability backpay, without that award, the interest payments may balloon. Credit unions are another potential source of loans while you wait for disability; they may accept less than excellent credit as well.

If you do get a loan, and you applied for SSI disability, be careful not to go over the resource (asset) limit. Any funds that you borrow and do not spend in the same month will count toward your SSI asset limit ($2,000 for an individual and $3,000 for a couple).

Loans to Avoid

There are some types of loans you should stay away from. Getting a personal loan online is generally not a good idea. Personal loans that you get online often have annual percentage rates (APR ) over 100%, and that's in addition to origination and document fees. Payday loans have even higher rates of interest when you look at the APR. Payday loan APRs are typically 400% to 500%. Compare this to a credit card's APR, which might be around 20%. And most people who take out a payday loan can't pay the loan back, and end up getting another payday loan within 30 days of the first. The interest that adds up can make it impossible to pay back a payday loan. With a pawnshop loan, you're less likely to get trapped in an endless cycle of debt, but the fees can be high compared to the amount of money you get. Typical APRs for pawnshop loans can be 100% to 250%.

Social Security Disability Loans

Social Security itself will make an emergency loan of one month's benefits to those who appear to qualify for disability through SSI's presumptive disability program. Only people who can prove an extreme hardship (such as a lack of shelter or food) can qualify. The emergency advance payment is like a loan; you must pay it back with your presumptive disability checks from SSI.

You also may be able to get a loan through your state's Interim Assistance (IA) program if you are likely to qualify for SSI. You have to sign an interim assistance reimbursement agreement, promising to pay back the public assistance with your SSI money.

There are a few ways other than loans to tide yourself over until you get your disability benefits. Learn about the financial assistance available while waiting for disability.

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