If you’re on disability and need some cash fast, you need to know: can you get a loan while on disability? Generally, the answer is yes – but how easy that is will depend on the type of disability you receive and the loan you need. Additionally, certain types of loans and loan agreements may impact your monthly benefits.
Living with a disability is challenging enough, but your struggles may be compounded if you have trouble paying bills. If you need to take out a personal loan, auto loan, or even a home loan, your disability income can help you qualify.
But whether – and how – getting a loan impacts your disability benefits depends on a variety of factors.
Is it possible to get a loan while on disability?
You can usually get a loan while on disability as long as you qualify for the terms of the loan. Typical qualification requirements may include:
- Meeting a minimum credit score requirement
- Having an acceptable debt-to-income ratio
- Meeting a minimum monthly or annual income requirement
What is a disability?
According to the Social Security Administration (SSA), you may be considered disabled if:
- Your disability has lasted or will last at least one year or will lead to your death
- You’re unable to perform the work you completed previously
- You’re unable to perform other types of work due to your medical condition
Physical disabilities that qualify for benefits range from blindness to immune disorders to respiratory conditions. Some mental conditions – such as depression, schizophrenia, and intellectual disorders – are also eligible.
Types of federal disability programs
There are two main federal disability programs that pay benefits: Social Security Disability Insurance and Supplemental Security Income. You can potentially qualify for both programs based on your situation.
Social Security Disability Insurance (SSDI) covers individual who have paid into Social Security for a certain amount of time. SSDI doesn’t impose the same strict income and resource limits to receive benefits, as you’ve “paid into” the program during your working years. Generally, receiving SSDI also qualifies you for Medicare coverage.
Supplemental Security Income (SSI) pays cash benefits to aged, blind, and disabled individuals based on financial need. SSI recipients must meet strict financial resource limits to qualify, including holding less than $2,000 in assets ($3,000 for couples). Individuals who qualify for SSI benefits automatically receive Medicaid coverage.
Qualifying for disability benefits
The Social Security Administration asks five basic questions to determine whether you qualify for disability:
- Are you working? You can earn as much as $1,350 per month ($2,260 if you’re blind) before taxes and still qualify for disability benefits.
- Is your condition “severe”? The SSA requires your condition to “significantly limit” your ability to complete work-related activities like lifting, walking, sitting, or remembering for at least 12 months.
- Is your condition found in the list of disabling conditions? The SSA maintains a list of conditions that qualify for benefits.
- Can you do the work you did previously? The SSA will determine if your condition prevents you from doing the same kind of work you did before.
- Can you do any other type of work? If you can’t do your previous job, the SSA will evaluate if you can do another kind of work based on your condition, skills, or education. If you can’t, you may qualify for disability.
How does a loan affect disability benefits?
According to the Social Security Administration, loans aren’t considered income for benefits eligibility purposes. However, depending on how you handle the loan process, getting a disability loan may affect your Supplemental Security Income eligibility.
Essentially, taking out a loan doesn’t disqualify you from SSI — at least at first. But if you don’t spend your loan money the month you receive it, the money will count toward your resource limit in the next month. As a result, you may find your benefits reduced or disqualified going forward.
In the reverse, if you lend money to someone else, receiving loan repayments may count as a resource under SSI rules.
Personal loans are loans used for a variety of personal needs, including:
- Medical debts
- Wedding and vacation financing
- Personal purchases, such as buying a new computer
Generally, to get a personal loan while on disability, you need to satisfy the lender’s minimum requirements. Often times, this means having at least a credit score of 580-640 and bringing in a certain minimum income.
You also need to prove you can repay your personal loan on top of your existing debts and obligations, such as rent.
Unfortunately, this can pose a problem for people on disability, as you’re generally restricted to a modest income. That doesn’t leave a lot of room for new debt payments.
That said, you can increase your approval odds by bringing in a cosigner or getting a secured loan. You may also qualify for an extended repayment term if you just need a small personal loan.
Auto loans are a popular kind of loan you can qualify for on disability benefits. Most car dealerships accept disability income as qualifying income for lending purposes.
That said, you’ll still have to pass a credit check and meet minimum debt-to-income ratio requirements.
One important note is that if you receive SSI benefits, you’re only allowed to own one car under your asset limit. As such, if you if you use your auto loan to buy a second car, you risk losing your benefits.
Mortgages are one of the best ways to build wealth and secure your future. And while your disability income may not support a conventional mortgage, there are other home loan programs available for those on SSDI and SSI benefits, such as:
- USDA loans
- FHA loans
- VA loans
Often, these mortgage programs accept Social Security disability benefits as income. Some programs even offer special benefits or financing to help disabled individuals cover their mortgage and homeownership costs.
For instance, low-income individuals may qualify for financial assistance to make mortgage payments from the USDA. And disabled veterans can apply for a waiver to remove the VA loan funding fee.
Generally, the Social Security Administration doesn’t count federal student loans as assets or income when considering your eligibility. The same may go for private student loans as long as you spend the money quickly.
Payday type loans and disability loans
It’s not uncommon to seek out a short-term loan to bridge the gap between becoming disabled and receiving disability payments. The same is true for covering short-term expenses incurred between paydays.
That’s where taking out a disability loan comes in. These loans often offer fast funding — as quick as same-day — or a cash advance on your next paycheck to tide you over. They may also accept a lower credit score (or skip the credit check entirely) than other lenders.
Unfortunately, short-term loans like payday and disability loans can be predatory, offering quick repayment terms paired with high fees and interest rates. As such, these loans are risky even if you have steady income. But if you’re on disability or awaiting approval, you may not have the income to support your loan repayments long-term. And if your disability claim is denied or expires, you’re still on the hook to repay your disability loan in full.
How to get a loan on disability
Depending on the type of loan you need, you can apply with an online lender, mortgage firm, bank, or credit union. But regardless of the specifics, the basic steps to get a loan while on disability remain the same.
1. Check your credit
Before applying for a loan, make sure your credit history doesn’t sport any errors that could affect your ability to qualify for a loan.
You’ll also want to ensure your credit score is as high as possible to increase your approval odds before the lender runs a credit check.
2. Research loan programs
Some loan programs help people on disability get the financing they need to reach their goals. Programs vary by location and purpose, such as using the funds for personal purchases or buying a house or car.
3. Shop around for the best rates
Before applying for a loan, shop around for the best interest rates to get the best deal. Many lenders let you prequalify in minutes without impacting your credit score.
4. Apply at the last minute (if possible)
If you need the money on a specific date or for a specific purchase, wait to apply as long as you can. If you get a personal loan and don’t use the cash within a month, the money can count toward your resource limits, which can impact your benefits eligibility.
5. Apply for your preferred loan
When the time comes, apply for a loan with your preferred lender. Be sure to bring supporting documentation to prove your identity and income, such as a government-issued ID, bank statements, and disability paystubs.
Emergency disability assistance
While not quite a loan, some SSI recipients may be eligible for emergency disability assistance as an alternative to borrowing money.
Depending on your needs, the SSA may approve you for advance payments for up to six months while you await your eligibility decision. These presumptive disability payments don’t have to be repaid even if you don’t qualify for benefits (unless you’re overpaid).
Additionally, if you’re due to receive SSI but facing food, shelter, or medical insecurities, you may be eligible for an emergency advance payment. However, unlike emergency disability assistance, you have to repay these sums eventually.
Can you get a loan on disability?
Yes, you can get a loan on disability as long as you qualify for funding based on your income and minimum credit score. This applies to personal and student loans, mortgage loans, auto loans, and more.
Do loans affect disability eligibility?
Generally, no, as long as you use the money right away. But if you wait more than a month to spend your lent funds, you may risk losing your benefits.
Do disability benefits count as income for a loan?
Usually, yes. Both long-term disability benefits and permanent disability insurance count as income for qualification purposes. However, you may struggle to get a loan if you’re on short-term disability with no financial backup to support you when your benefits expire.
Can I buy a house on disability?
It’s possible to qualify for a mortgage and low-income home loan programs based on just your disability income. But that doesn’t mean it’s always easy.
For instance, some lenders may be more inclined to accept disability benefits than others. Additionally, you may be stuck with higher interest rates if mortgage lenders consider you a risk.
How can you get a loan while on disability?
Start by reaching out to agencies that offer government assistance such as emergency or interim funding. If you strike out there, rate shop different lenders and apply just like you would for a regular loan.
- If you’re on disability, you can still qualify for personal, auto, home, and student loans
- How your loan impacts your disability benefits depends on if you receive SSDI or SSI benefits
- Applying for and receiving a loan while on disability works just like applying for a loan any other time
- However, your fixed monthly income may make it difficult to qualify for a loan, especially if your expenses are high
- In some cases, you may qualify for an advanced or emergency advance payment schedule from the SSA
Compare lenders before you sign
If you’re not sure where to start looking for a loan you can get while on disability, our personal loan comparison tool may help. We break down the rates, loan amounts, and pros and cons of various loans and lenders to help you make the best choice for you.