Coping with loss: should you borrow for a funeral?

It's never easy to say goodbye to a loved one. The emotional toll of grief and the financial burden of funeral planning can be overwhelming. Many families struggle to find the money to pay for a funeral, and you often don't get much time to figure out how you'll pay.

The costs of a funeral can strain even healthy finances. A solution that works for some people is a funeral loan. It's a personal loan for people who need a helping hand to cover a funeral and other end-of-life expenses.

What are funeral loans, and how do they work?

Funeral loans are usually unsecured personal loans. You get a lump sum of money upfront after the lender approves your loan. You repay it in equal monthly payments, usually over two to seven years.

There are typically very few restrictions on how you can use a personal loan. Once you receive the money, you could use it to cover expected or unexpected expenses, including final arrangements for a loved one.

The application and funding steps

Most people apply for funeral loans online, though you may be able to apply in person or over the phone, depending on the lender. Before you start, have your income documents, ID, and Social Security number ready, and decide how much you need to borrow so you can complete the application accurately.

The lender will check your credit report, income, and debts to set your loan amount and interest rate. Most lenders let you check estimated rates through prequalification with a soft inquiry, which doesn't affect your credit score. The application itself will likely trigger a hard inquiry, which affects your credit, although typically only a small amount.

Once you're approved and sign your loan documents, funding times vary by lender. Achieve Personal Loans can fund as soon as the next business day.

Funeral costs and expenses to plan for

You can use a funeral loan to cover just about any funeral costs and expenses, which may include:

• Funeral home service fee

• Hearse

• Cremation

• Embalming

• Casket or urn

• Burial plot

• Travel costs

• Event space rental

• Officiant fee

• Donation to the place of worship

• Obituary in your local newspaper

• Copies of the death certificate

Those expenses can add up fast. A funeral loan allows you to spread out the costs over time.

The National Funeral Directors Association (NFDA) reported a national median cost of $8,300 for a funeral with viewing and burial in 2023. The same study put a cremation funeral with a viewing at about $6,280. Those funeral-home medians exclude cemetery and other add-on costs.

The pros and cons of funeral loans

How to choose the right funeral loan

Here are a few important things to consider when deciding which funeral loan is right for you:

• How much do you need to borrow? Is the lender's minimum more than what you need?

• Is there a prepayment penalty? If you borrow more than you need, family members help you repay the loan, or a life insurance policy pays out, can you pay it down ahead of schedule without a penalty?

• How long do you need to repay the loan? A two-year loan may have a lower interest rate or lower origination fee than a five-year loan.

• How much are the fees? An origination fee is the fee the lender charges for making the loan. It's usually deducted from the amount you borrow, so the lower the origination fee, the more of the loan amount you receive.

• What’s the annual percentage rate (APR)? APR is the yearly cost of the loan, including interest and other fees. It’s the most straightforward way to compare the cost of different loans.

Lenders look at your credit history, your income, and the debt you already carry when you apply for a funeral loan. You could apply with a lower credit score. Approval is harder and rates tend to be higher, but you may still qualify. A co-applicant with good credit could strengthen your application.

Focus on what you can do now: gather your income documents, choose a loan amount that fits your budget, and start comparing loan options.

Other ways to pay for a funeral

A funeral loan isn't the only way to cover funeral expenses. Here are a few more tools that may help you pay for a funeral.

Government and insurance help

The Social Security Administration can pay a death benefit of $255 to a qualified surviving spouse or dependent child. While the amount may not seem like much, every little bit helps.

The deceased's life insurance policy may pay a death benefit that covers some or all of the funeral costs. Since life insurance payouts often take weeks, many funeral homes accept an assignment of life insurance, which means the insurance company pays the funeral home first.

Your state or county might offer public assistance to cover part of the funeral costs. To find out, search "funeral grant in [your state or county]."

Payment plans and secured loans

Some funeral homes let you arrange a payment plan directly, so you can spread the cost over time without a separate loan.

When that's not an option, a secured loan may be easier to qualify for than an unsecured personal loan. Secured loans often have a lower interest rate compared to unsecured loans and credit cards, and higher maximum loan amounts.

If you’re a homeowner with sufficient home equity to borrow against, secured loan options include a home equity loan or home equity line of credit (HELOC). Equity is the difference between your home's current market value and the amount you still owe on the mortgage (if you have a mortgage).

You pledge your home as collateral on the loan. This lowers the risk for the lender, so they can be more flexible with qualification requirements. The tradeoff is that if you default on the loan, you could face foreclosure. Also, home equity loans and HELOCs can take weeks to close, so they’re not as fast as a personal loan.

Support and comfort for your loved ones

It's natural to feel overwhelmed when a loved one passes away, and those around you likely feel the same way. Funeral expenses, especially if they're unexpected, can cause anyone stress. A plan for how you'll pay for those expenses could give you and your loved ones the space to focus on supporting each other.