If you can't work because of a disability and you're waiting for Social Security to decide your disability claim, you might be running out of money. It could take months—even years—for your Social Security disability insurance (SSDI) or Supplemental Security Income (SSI) application to work its way through the disability claims process. (Find out why your decision might be taking so long.)
How do you get by until your disability benefits start? You might consider getting a personal loan to tide you over. And sometimes there are loans available—but you should think carefully before you agree to take on new debt when there's no guarantee Social Security will approve your disability application.
Here are some things to consider if you're waiting for disability and trying to decide whether or not to get a loan.
There are a few loans that you might be able to get while you wait for Social Security to decide your SSDI or SSI disability claim. Whether getting a loan is a good option for you and which loans might be available to you will depend on several factors, including:
You might be able to get a personal loan to help you pay your bills while you wait for Social Security to approve your disability application. There are a couple of possible sources.
Since disability loans are generally personal loans, it's usually easier to get them from finance offices (also called consumer loan offices) than from traditional lending institutions (like banks). Most consumer loan companies are more lenient when evaluating your prior history of installment loans (like car loans) and revolving debt payments (like credit card payments).
Credit unions are another potential source of personal loans while you wait for SSDI or SSI disability. And because they're member-owned, they might not require members to have the same excellent credit a bank would require you to have.
There are some advantages and disadvantages to getting a personal loan while you wait for your Social Security determination.
When you can't work and you have no income because of a disability, you still need to eat and pay your bills while you wait for Social Security to decide your claim. A personal loan can help get you through.
It's fast. Getting a decision on a personal loan to cover your expenses while you wait for disability can be very quick. You can sometimes get approved within minutes of applying.
It puts money in your pocket. If you can secure a personal loan, you'll have immediate cash on hand to cover your expenses while you wait for your disability to come through.
It can build your credit. If you can manage the cost and repayment terms of a personal loan, you can actually improve your credit.
One of the most obvious downsides to using personal loans to cover your expenses while waiting on disability is the cost.
It can be expensive. Before taking out a personal loan, you need to consider that these loans can come with high interest rates, especially if you're not working when you get one.
You'll have to repay it even if your disability is denied. You might be able to keep the amount of interest you'll pay fairly small if you can repay the loan quickly using your Social Security disability backpay. But without that award, the interest payments could balloon. And if your disability is denied, you might not be able to pay the loan back on time, if at all.
It might disqualify you from SSI. If you do get a loan and you applied for SSI disability, you'll need to be careful not to go over SSI's resource (asset) limit. Any funds that you borrow and don't spend in the same month will count toward your SSI asset limit ($2,000 for an individual and $3,000 for a couple).
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 30%, and that's in addition to origination and document fees.
Payday loans have even higher interest rates 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 right away 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%.
If you're applying for SSI disability benefits, you might qualify for an emergency loan from the Social Security Administration (SSA). To get a one-time emergency loan, it must be likely that you'll qualify for SSI's presumptive disability program (which pays you benefits for up to six months while you wait for Social Security to process your initial SSI claim).
But to get the emergency benefits, you'll need to prove that you have an extreme hardship (such as a lack of shelter or food). And the emergency advance payment is a loan—you must pay it back with your presumptive disability benefits from SSI.
You also might be able to get a loan through your state's Interim Assistance Reimbursement (IAR) program if:
IAR loans are a type of public assistance designed to help people waiting for SSI disability benefits. About half the states, including California and New York, participate in the program. To get an IAR loan, you'll have to sign an agreement promising that you'll pay back the assistance with your SSI money.
Getting a loan can be difficult during the best of times. But convincing a lender to give you a loan when you're disabled and can't work can be extremely challenging. There are a few strategies you should keep in mind when considering and applying for loans to get through the long wait for Social Security disability.
A loan isn't your only option to cover your expenses until you get your SSDI or SSI disability benefits. Learn about other financial help you might get while waiting for disability.
Updated December 12, 2022