What are Personal Loans for People with Disability Benefits?
Are you or someone you know on disability and need a loan? Most people who receive financial aid for their disability might face a roadblock when applying for personal loans. This is the case especially in the absence of any income other than SSI. The reason being that a personal loan is usually debt provided by banks and financial institutions which is unsecured.
What is SSI?
Supplemental Security Income or SSI is monetary aid to disabled adults who have inadequate income.
Disability is defined by The US Social Security Administration as a person’s incapability to be sufficiently involved in any remunerative capacity. In other words, being unable to receive minimum wage or higher. (SAG is defined as “substantial gainful activity” and is calculated as earning more than $1,220 per month. Or in the case of the blind, earning more than $2,040 per month.).
Is Credit score important?
Your credit rating is extremely important. If you have a good credit score, securing a personal loan should not be much different from someone who isn’t on disability. Your credit history will be a testament to your ability to pay back the money.
Now, people who have a poor debt to income ratio, coupled with a bad credit rating, and no income except their SSI benefits, may find it a challenge securing a loan, especially in the case of conventional unsecured loans. However, even if an individual has an average credit rating, certain banks will issue a short-term loan. They will take into cognizance the person’s ability to pay back the loan.
Purpose of Personal Loans
Most banks and financial institutions are not concerned with the purpose of the loan or how you spend the money. Individuals might borrow for various reasons, which could range from auto repair and maintenance to education or training.
Interest Rates and Timelines
Personal or signature loans, as they are referred to, can be issued on an interest rate of as low as 5%. The highest being around the 30% mark. This figure will vary based on your credit rating and the bank’s or financial institution’s lending policy. The term is typically between a range of 1 to 5 years. Standard repayment schedules will apply, which is usually on a monthly basis.
Does the unutilized loan amount affect SSI?
What happens if an SSI beneficiary is granted a personal loan but has not spent the entire amount before the month end? How is the balance amount treated? SSI providers will calculate any unspent loan amount as a part of the individual’s assets. This will have a bearing on future SSI payments. So be very cautious when determining how much you need to borrow. Apply for only how much you need.
Things to Avoid:
- Be wary of payday or title loans. They might be considered personal loans, but there is a huge divide. Money sharks target low-income groups for these loans, with promises of no credit checks. They might also state specifically that having a bad credit score is okay! Don’t be fooled by their false claims! These loans typically constitute short lending periods and charge exorbitant interest. It isn’t uncommon to have lending rates of 250% or higher in most states. Alarming! And these lenders aren’t subject to many regulations that govern banks and other financial institutions.
- Lenders who are not registered or authorized in your residential state. They do not conform to the law of the land and will only add your troubles.
Advantages of Personal Loans for People with Disability Benefits
Most short-term loans involve a fast turnaround - have simple applications and quick
approvals. Unlike long-term credit, the rules governing short-term loans are fairly straightforward and less severe.
To sum up, personal loans for people on disability are not uncommon. Banks and creditors do grant these loans based on an individual’s credit score as well as income other than SSI benefits. The borrower has to be aware of the pitfalls when choosing a lender and the snares that could entrap him or her.