Living on disability benefits often means working with a tight budget, and when unexpected expenses hit, a personal loan might seem like the only option—but there are important factors to consider before you apply.
In this article, we'll cover:
- Whether you can qualify for a personal loan on disability income
- How lenders evaluate disability benefits as income
- The impact of personal loans on SSDI vs. SSI benefits
- Alternatives to personal loans for people on disability
- How to avoid predatory lenders targeting fixed-income borrowers
Can You Qualify for a Personal Loan on Disability Income?
Yes, you can qualify for a personal loan while receiving SSDI or SSI. Lenders are prohibited from discriminating against applicants based on disability status, and they must consider disability income just like any other income source when evaluating your application.
However, qualifying depends on several factors, including your income amount, credit score, debt-to-income ratio, and the lender's specific requirements. Because disability benefits are often modest, you may face more limited options or higher interest rates than borrowers with higher incomes.
How Lenders View Disability Income
Most lenders will accept SSDI or SSI as verifiable income. You'll typically need to provide documentation such as your benefit verification letter from SSA, bank statements showing regular deposits, or your SSA-1099 tax form.
Some lenders specialize in working with borrowers on fixed incomes, while others may have minimum income requirements that exclude disability recipients. Shopping around and comparing offers is essential.
Will a Personal Loan Affect Your Benefits?
For SSDI recipients, taking out a personal loan will not affect your benefits. SSDI has no asset or resource limits, so the loan proceeds won't jeopardize your eligibility.
For SSI recipients, the situation is more nuanced. Loan proceeds are generally not counted as income in the month you receive them, but any funds remaining at the end of the month become countable resources. If those resources push you over the $2,000 limit, your SSI could be suspended.
Alternatives to Consider
Before taking on debt, explore other options that might help with your financial situation. Many utility companies, medical providers, and nonprofits offer assistance programs specifically for people with disabilities. You might also consider whether an ABLE account could help you save for larger expenses without affecting your benefits.
If you do decide a loan is right for you, be cautious about predatory lenders who target people on fixed incomes with high-interest products. Look for reputable lenders with transparent terms and reasonable rates.
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