What is a funeral loan and how do I get one?

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A funeral loan generally refers to a personal loan used to pay funeral expenses. Funeral loans usually have relatively low fixed rates. (Shutterstock)

When dealing with the grief of losing a loved one, the added stress of paying for funeral services can make an already difficult time worse. If your loved one’s estate does not have the resources to cover final arrangements, you have options to help cover burial or cremation costs.

Here’s what to know about funeral loans and other ways to cover funeral expenses.

If you need help covering funeral expenses for a loved one, you can visit Credible to compare personal loan rates and find an option that suits your needs.

What is a funeral loan?

A funeral loan is a personal loan that allows you to cover significant funeral costs, as well as burial or cremation. They are generally no different from other personal loans.

Like everything personal loans, you will borrow a specific amount of money that you will receive in advance. Then you’ll pay off the loan in monthly installments at a fixed interest rate, which means your payment amount won’t change.

Personal loan interest rates are generally lower than credit card interest rates. Most personal loans typically don’t require collateral, so you don’t risk your assets if you fail to make your payments.

How to take out a funeral loan

If you have determined that a funeral loan is the best way to pay for your loved one’s funeral arrangements, here are the steps to take out a funeral loan.

Step 1: Make a priority list

Your loved one’s will can include details about their wishes for funeral services and whether they prefer to be buried or cremated. During this time, you and your family can also decide if you would like to have a visitation or a memorial service.

Step 2: Obtain several funeral quotes

Before borrowing money, make a list of what you will need to pay and how much each item will cost based on the priorities you have set. This list could include a casket, headstone, funeral service costs, and other funeral-related expenses. Your funeral director can help you decide between the options you have for each category and determine the price.

During this step, it may also be helpful to speak with multiple funeral homes to find the best fit. Funeral directors should also be able to help you understand where you can cut costs.

Add up the costs of the list you created. This will show you how much money you will need to borrow.

Step 3: Check your credit score

Your credit score will be a major factor in determining whether you will qualify for a funeral loan and the interest rate a lender will offer you. Higher scores give more options and better rates. A fair credit score may have fewer options, and have bad credit can make it difficult to get a personal loan.

You can find out your credit score by requesting free copies of your credit report from the three major credit bureaus – Equifax, Experian and TransUnion – by visiting AnnualCreditReport.com.

When you receive your report, review it carefully for any errors, such as incorrect balances or checking accounts listed as overdue. If you discover incorrect information, you can dispute the items with the credit bureau and have them corrected. This can increase your score. If you had a bankruptcy in your recent pastyou may have to wait before you can qualify for a personal loan.

Step 4: Get prequalified with multiple lenders

Personal lenders usually allow you to prequalify for a loan by filling out a short form, usually including your social security number. Lenders will pull your credit lightly to review your file, which means your score shouldn’t be affected. With this information, personal lenders will let you know if you are likely to qualify for a loan and give you an interest rate.

Credible allows you to evaluate prequalified personal loan rates from multiple lenders without hurting your credit score.

Step 5: Choose the best fit

Carefully review the loan offers you receive, looking at things like the interest rate, how long you have to repay the loan, and any fees the lender may charge. Your loan offers will usually also include an estimated monthly payment amount. Choose the loan offer that best suits your budget and your needs.

Step 6: Apply for the loan

The lender you select will provide you with instructions on how to complete a complete loan application. You may be asked to disclose more information about your finances and provide documents to verify your income or employment, such as W-2 forms, pay stubs, and bank statements.

Step 7: Complete the loan and receive the funds

In many cases, personal lenders will deposit your loan funds directly into your bank account. The amount you receive will already have all loan fees deducted from the total.

Once the money is in your bank account, you can use it to pay for the funeral expenses you described in the first steps. You will also get details of when you need to start repaying the money. Most lenders offer an automatic payment option, where your monthly payment is automatically deducted from your account on the due date.

How much does a funeral cost?

Funerals can be expensive. The average cost of a funeral in 2021 was $7,848, according to the National Funeral Directors Association. These costs do not include additional costs such as headstones, cemetery fees, flowers, and holding an obituary.

The following costs are from the National Association of Funeral Directors annual list. Costs may vary by region of the country.

Traditional funeral expenses

  • Service charge : $2,300
  • Removal and transfer of the remains to the funeral home: $350
  • Embalming and preparation for viewing: $1,050
  • Use of facilities and staff for viewing: $450
  • Funeral ceremony: $515
  • Hearse: $350
  • Service car or van: $150
  • Commemorative printed package: $183
  • Metal box: $2,500

Funeral expenses with cremation

  • Basic service fees: $2,300
  • Removal and transfer of the remains to the funeral home: $350
  • Embalming and other preparation: $1,050
  • Use of Facilities and Staff for Viewing and Funeral Ceremony: $965
  • Cremation costs: $368
  • Service car or van: $150
  • Commemorative printed package: $183

Who bears the funeral costs?

Family members of the deceased are generally responsible for planning and paying for funeral services. But your loved one may have designated a specific person, or agent, who will take responsibility for the process and communicate with other family members about arrangements.

In many states, people can prepay for their funerals to help reduce the financial burden on family members when they die. In some cases, this money is held in a trust. In other cases, the person will take out an insurance policy that will cover funeral and burial or cremation costs.

If you need a personal loan to pay for your loved one’s funeral expenses, you can use Credible to easily compare personal loan rates from various lenders.

Alternatives to the funeral loan

A funeral loan is not the only option you have to pay for your loved one’s funeral expenses. The following may be better suited, depending on your situation:

  • Life insurance – Your loved one may have a life insurance policy that pays out to a beneficiary upon death. You can use the payout from this policy to pay for funeral services. The policyholder can also have a particular form of life insurance called funeral insurance. These policies usually have a small value – between $5,000 and $25,000 – and are intended to be used to pay funeral expenses.
  • Tap into an emergency fund — It’s a good policy to keep at least three to six months of your regular expenses in an emergency savings fund for unexpected expenses. If you have saved some money, you may be able to use it to cover service costs without going into debt.
  • Credit card 0% intro APR — Some credit cards offer low or zero interest rate APRs for a certain period of time. You may be able to use such a card to pay funeral expenses, especially if you are sure you can pay off the balance in a relatively short time. Keep in mind that the interest rate on these cards increases significantly after the introductory period ends. If you haven’t paid off the balance, you may even owe interest going back to when you first made a purchase with the card.

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