Personal Loans for People on Disability

A personal loan allows eligible individuals to borrow a lump sum based on their income and credit history. Disability income counts as one of the qualifications, but the loan amount you qualify for is based on how much you can afford to repay.

This is calculated based on your other debt payments, not your income source. The Equal Credit Opportunity Act prohibits lenders from discriminating against applicants based on certain factors. One receives public assistance, including Social Security Disability Insurance (SSDI). 

Learn what to expect when applying for a personal loan while on disability and explore lenders that could help you get the funding you need. Also, find out whether receiving a loan impacts your SSDI eligibility. 

Best personal loans for people on disability benefits

Navigating the world of personal loans can be daunting, especially for those on disability. We found several lenders and lending platforms attuned to the unique needs of this demographic. 

We’ve rounded up a selection below, each with more details to help guide your decision-making process.

Lender	Min. income	Rates (APR)
Credible	None*	7.49% – 35.99%
Upgrade	None	8.49% – 35.99%

Credible – Best marketplace 

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LendEDU rating: 5 out of 5

• Wide range of loan options
• Comprehensive loan comparison tool
• High level of transparency

Credible stands out as the top marketplace for personal loans, particularly for people on disability. It provides a wide range of options, catering to various financial needs. 

Its loan comparison tool allows borrowers to compare lenders easily, ensuring optimal choice and flexibility.

Upgrade – Best for fair credit 

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LendEDU rating: 4.9 out of 5

• Accepts borrowers with fair credit
• Flexible loan terms
• Quick funding process

Upgrade is an excellent choice for those with fair credit looking for personal loans. It provides flexible loan terms, catering to a variety of financial requirements. It’s known for its fast funding — an essential factor for individuals on disability needing immediate financial assistance.

How to choose a personal loan 

Follow these steps before you pick a personal loan while on disability. 

1. Check your credit score and credit report

Your credit score and credit report are two different things. To further complicate things, there are three different credit bureaus, each with a credit score and credit report for you. 

Check your credit reports for any errors. If you find any, you may want to begin the dispute process officially. Next, record your credit score. It may or may not limit which lenders you can work with.

2. Research eligibility requirements

Disability loans between lenders can have different eligibility requirements. If you have trouble finding their requirements, see if they offer prequalification. Prequalifications are soft credit checks, so you can determine if you’ll likely qualify without hurting your credit score.

3. Compare lenders

Loan amounts vary from lender to lender. Once you’ve determined which lenders are willing to work with you after step one, your next step is to compare loan amounts and terms. Here are some questions to answer:

• How much can you borrow, and what is the maximum loan term? 
• Where do interest rates start? 
• What do they charge in fees? 
• Does the lender address fluctuating income? 

Look specifically for lenders that offer flexible payment options should you have any sudden medical expenses or dips in income. 

4. Gather supporting documents

In addition to providing a government-issued ID, you may also need proof of disability and income verification. Bank statements, benefit statements, or even direct deposit records may be required depending on the lender.

5. Apply

Whichever lender you choose will require you to submit a formal application beyond pre-qualification. Complete the application online and submit any formal documents that are required. 

The absence of any one required document may delay your application or lead to the lender denying your request.

6. Review and accept loan agreement

If approved for a personal loan, your lender will send you a loan agreement. Read through the document and contact a loan officer with any questions. If everything looks good, sign and return the form.  

Tip

Avoid working with lenders that charge prepayment fees for paying off your loan early. Also, if a monthly payment seems too low, double-check that the lender doesn’t require a balloon payment after a certain time.

Balloon payments occur when the lender requires the remaining loan principal to be paid by a specific date instead of having each monthly payment be the same. 

The lender’s goal is to attract borrowers using low monthly payments. Then, they may need to refinance the loan to avoid the balloon payment, which increases the amount of money the lender makes in fees and interest. 

Can a personal loan affect my disability benefits? 

Personal loans are not considered income. They come with interest, fees, and monthly payments just like a car loan does. The money you receive from a personal loan is essentially a product. In other words, it’s not free and comes with a cost, no matter how you use the funds. 

Because of this, personal loans do not directly affect your Supplemental Security Income (SSI). However, one thing to remember is that, if you do not spend the loan funds in the month you receive them, the leftover money counts towards your SSI resource limit in the next month. Here are the monthly limits:

• $2,000 for individuals
• $3,000 for couples

Your SSI eligibility could be impacted if you exceed your monthly resource limit. Avoid this by having a plan for your loan funds and spending them as soon as possible. Contact a benefits counselor or financial advisor with any questions or concerns. 

Be mindful of potential exploitation that offers lower initial monthly payments to make it seem more affordable. Also be mindful of loans that have balloon payments.

Jim McCarthy

CFP®

Alternatives to personal loans for disabled

Personal loans for disabled people can be viable, but it’s prudent to consider options that may offer different benefits. One of the strategies we describe below could be better, depending on your circumstances. 

Saving as a financial strategy

A disciplined savings plan is a more self-reliant solution than personal loans. By setting aside some of your income or disability benefits, you can build a nest egg to cover emergencies or planned expenses. 

The advantage is evident: no interest, no repayment terms, and no risk of debt. The only drawback is time. Creating a substantial savings account might take longer than applying for a loan.

Loans from family or friends

Borrowing from loved ones poses a different set of pros and cons. Unlike personal loans, which require formal applications and assessments, a loan from family or friends tends to be more informal, often with more flexible repayment terms. 

However, this option has a unique risk: Not meeting repayment expectations can strain personal relationships and create conflicts.

Use a credit card

Credit cards can offer quick access to funds. This immediacy is their primary advantage over personal loans. Plus, some credit cards offer rewards or cash back on purchases, which can be beneficial. However, credit cards have higher interest rates than many personal loans, and the temptation to overspend may lead to excessive high-interest debt if not managed carefully.

Tap into a home equity loan or HELOC

A home equity loan or a home equity line of credit (HELOC) can provide funds if you’re a homeowner. These financial products use the equity in your home as collateral, and many can offer lower interest rates than personal loans. However, the major downside is the risk: If you fail to repay, you could lose your home.

By understanding these alternatives, you can make an informed decision and choose the financial product that best suits your situation and needs.