Should You Take Out a Funeral Loan?
Paying for a funeral is an issue everyone will need to deal with at some point in their lives. Whether the death of a loved one moves the subject to the forefront, or if you are estate planning and want to make advance arrangements, you will soon find yourself surrounded by funeral payment options.
Of the many types of funeral financing available, funeral loans are the least popular—and with good reason. This is the most expensive way to pay for a funeral, since you will not only need to go into debt to pay for everything, but you’ll also pay interest for the life of the loan (as well as banking fees). However, for some families, there is simply no other way to come up with the necessary money on short notice.
If you’re facing this issue and aren’t sure if taking out a funeral loan is right for you, here are a few considerations:
- Funeral loans aren’t always necessary. In fact, if the person or company offering to finance the funeral has an interest in how much you spend (as in, the funeral director or other paid employee), there is a chance they might push you to purchase more than you need. If you can’t pay out of pocket for the funeral, look at the choices you’ve made and see if there are easy ways to save money. Cremation instead of burial, a less expensive or third-party casket, or even a direct burial can all make a funeral more affordable without forcing you to take out a loan.
- Funeral loans must be repaid by you. When someone dies, their estate is responsible for things like funeral costs. This means that the sum total of their personal belongings (homes, vehicles, assets, etc.) can be used to pay for the funeral. If the estate cannot afford a funeral and no family member steps forward to foot the bill, the city or county then becomes responsible and you won’t be asked to repay them for the costs (of course, you also don’t get a say in how the body is disposed of). However, once you enter into a funeral loan agreement, the fiscal responsibility for paying it back becomes yours and yours alone.
- Funeral loans are like traditional loans. If you have ever financed a car or house, you’ll find the process for getting a funeral loan to be much the same. Your credit will be run through a check, you might be asked to provide proof of income, and you might even need to put down a piece of collateral to secure the loan. Your interest rates and repayment terms will vary depending on your situation.
The most important thing to keep in mind is that there may be other alternatives out there. Most experts recommend that you consider all other options before you resort to a funeral loan. From insurance payouts to family support, it’s important to look at all the different ways to pay for a funeral before you go into debt—especially if the deceased was your primary source of income.
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By Amy Johnson