The low fixed income nature of disability benefits can make it difficult to get a traditional unsecured cash loan. However, there are a few factors that can improve your odds of obtaining one. Barring that, payday loans or a credit card may provide a suitable alternative to meet your short-term cash needs.
Disability benefits may be somewhat of an advantage when applying for loans, because they provide guaranteed stable income. The major limitation is that your monthly income is so low. Lenders consider your debt-to-income ratio when deciding whether to approve your loan application. This is the ratio of your total monthly debt payments to your monthly income. A ratio of 36 percent or lower is considered good for most people, according to U.S. News and World Report. However, the lower your income, the lower your debt will need to be to achieve the required debt-to-income ratio.
Your credits score is one of the first things a lender will examine. The FICO scores range from 350 to 850 with higher scores being better. The Consumer Federation of America reports that lenders consider scores above 700 to be very good. Scores below 600 are considered high risk and coupled with the low income provided by disability benefits likely will result in your loan application being denied. If your score is low, improve it by paying down any debt and staying current on all bills and debt payments.
Payday lenders offer a cash loan on the basis of your next paycheck, or, in this case, your next disability benefit check. You get cash immediately, and when your benefits arrive, the lender withdraws the money from your bank account, often through a post-dated check you leave with the lender. These loans have very high rates of interest and may charge large fees.
Credit cards offer an option that functions similarly to a small cash loan, or they can be used to take out cash advances. The limited income from your disability benefits can again be a problem, though not necessarily an insurmountable one. Contact your current bank first, because often it is easier to get a credit card through a bank with which you already have a working relationship. If that is unsuccessful, apply for a card through a credit union. Credit unions generally require membership in an organization, so investigate whether you can join a credit union through your college alumni organization or a local community club.
- U.S. News and World Report: Are You in Over Your Head?
- CNN Money: Tired of Credit-Card Gotchas?
- Social Security Disability Help: Is it Difficult to Get Credit When Receiving Social Security Disability?
- Payday Man: Can I Get a Cash Advance from a Payday Loan if I'm on Social Security?
- Consumer Federation of America: Your Credit Scores