When a loved one passes away, it can be a shock in every way possible. Along with the grief and loss come a wide range of urgent end-of-life expenses. And, in some cases, there’s not enough money to cover them. If you’re in charge of organizing the funeral, a funeral loan could help cover your expenses. We'll cover how funeral loans work, how to get one, and what to be aware of.
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How do funeral loans work?
A funeral loan typically refers to an unsecured personal loan that a borrower uses to cover a loved one’s funeral expenses or lodging and other expenses for yourself or other mourners. When you take one out, the lender provides you with a lump sum of money that you can use pretty much however you’d like.
- Repayment: After receiving the loan, you’ll need to repay it, plus interest, through monthly payments over a fixed term. Most lenders offer repayment terms from one to seven years.
- Interest rates: Your interest rate will depend on factors like the amount you wish to borrow, your credit score, your credit history, and your income. Lenders generally prefer a FICO score of 640 or above. Personal loan rates generally range between 7% APR and 36% APR.
- Loan amounts: Lenders typically offer loan amounts from $1,000 to $50,000. But the amount you'll qualify for depends on your income, credit score, and existing debt.
- Fees: Additionally, some lenders charge an origination fee equal to a percentage of the loan amount. It typically gets deducted from your loan amount before the funds are sent to you and could be as high as 12%. Lenders may charge fees for late payments or insufficient funds as well.
Expert editor insight: “It’s important to look at the annual percentage rate (APR) when comparing funeral loans, especially if comparing different types of funeral or cemetery loans. The APR includes the interest rate and any upfront fees, and is a better measure of overall borrowing costs than relying on the interest rate alone.”
— Meredith Mangan, Senior Personal Loans Editor, Credible
How much does a funeral loan cost?
The median cost of a funeral with a viewing and a burial was $8,300 in 2023 (the most recent data), according to the National Funeral Directors Association (NFDA). This includes:
- The mandatory basic services fee: $2,495
- Embalming: $845
- Other body preparations: $295
- Removal and transfer of remains: $395
- Use of staff and facilities for viewing: $475
- Use of staff and facilities for the funeral ceremony: $550
- Hearse: $375
- Service van/car: $175
- Basic memorial package with printed materials: $195
- Metal burial casket: $2,500
Keep in mind
A vault is not included, and adds a median cost of $1,695. If you decided to opt for a funeral with a viewing and cremation, the median cost is $6,280.
Check Out: How Much of a Personal Loan Can I Get?
Pros and cons of a funeral loan
Taking out a personal loan to cover a funeral comes with both pros and cons. On the upside, if you’re in a situation where you don’t have the funds to cover a loved one’s end-of-life expenses, one can help you take care of them right away. You can often apply, get approved, and have the funds in your bank account within one or two business days.
On the downside, personal loans come with costs. You’ll have to pay interest and possibly fees. Further, if your credit is less than good, APRs can be on the high end. It’s important to ensure that the monthly payments and overall costs will work for you long term.
Pros and cons
Pros
- Get funds fast (often within one business day)
- Monthly payments over several years
- Lower rates than credit cards (on average)
- Lump sum deposited into your bank account
Cons
- Borrowing costs (including interest and fees)
- Hard to qualify with bad credit
- Loan costs could be high without good credit
See Also: Where Can I Get a Personal Loan?
Funeral loan alternatives
What options do you have besides a personal loan? Here are a few alternatives:
- Life insurance policy: If your loved one had a life insurance policy, this could cover your funeral expenses. Life insurance policies pay beneficiaries named in the policy with a lump sum of cash or in periodic payments. Contact the insurance company immediately to understand the timeline and your options for receiving funds. If you need to take out a funeral loan because funds will be delayed, you could potentially pay it off with the life insurance money.
- Low-APR credit card: If you’re not sure about taking out a funeral loan, a low-APR credit card could be a better option. You can often find credit cards that offer 0% introductory APRs, which means no interest will accrue on purchases for a certain period of time. However, keep in mind that once the promotional rate expires, the standard APR will resume, and you’ll be responsible for any interest that accrues on the existing balance.
- Crowdfund: Instead of taking on debt and covering all the costs yourself, you can launch a crowdfunding campaign on a site like GoFundMe and request donations from friends and family. Even if it doesn’t cover all of the costs, it can help to reduce the amount you need to borrow.
- Home equity loan or HELOC: If you’re having trouble getting an unsecured loan but are a homeowner, you may have better luck with a home equity loan or line of credit. While they come with costly fees in some cases, they offer a way to get a large loan with a low APR. However, these are secured by your home, and if you default, you could lose it.
- Contact the funeral home: You can also contact several funeral homes in your area to compare costs and ask about payment plans. They may be willing to offer discounts or split your expenses up over time.
Tip
Along with the above suggestions, check if the deceased was entitled to any benefits. For example, eligible U.S. veterans, their spouses, and their dependent children are offered burial benefits, and many employers provide survivor benefits.
How to apply for a funeral loan
The first step in applying for a personal loan is to find out if you prequalify. When you prequalify, there’s no impact on your credit score, and you will receive quotes from lenders likely to approve you if you meet their qualifications. However, prequalification is not an offer of credit, and the final rate you receive may be different than what you were quoted.
- Make a list of your priorities: Before comparison shopping, consider your priorities for your loved one’s funeral. Are you looking for a type of casket or headstone? What about the location? Is it near so you can visit? Once you know what you’re looking for, it can help you narrow down your expenses and find the loan that’s right for you.
- Get several funeral cost estimates: Get quotes from a few different funeral homes before comparison shopping for a lender. The services that funeral facilities offer can vary in pricing.
- Know your credit score: Check your credit score so you can correct any errors that could be impacting your credit and your ability to qualify for a lower APR.
- Get prequalified with several lenders: When you prequalify, lenders perform a soft credit check that doesn’t hurt your credit score. Then, you’ll receive quotes that include the loan amounts, APRs, and terms you could be approved for.
- Review your lender options: Compare the APRs, loan amounts, and terms, as well as funding times and lender reputations. You can often find customer reviews on sites like the Better Business Bureau (BBB).
- Apply for the loan and get your funds: If you receive a loan quote that looks good, submit a formal application. The process typically involves verifying your identity and income, along with a hard credit check that will lower your score by a few points temporarily. If your application is approved, you’ll sign the loan contract and the lender will send the funds to your bank account.
FAQ
What if I can’t afford a funeral?
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Where can I get a funeral loan?
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Can you get a funeral loan with bad credit?
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