Funeral Loans for Bad Credit: What to Know

Losing a loved one can be a difficult experience on a number of levels, including financially, with the average cost of a funeral, including a viewing and burial, currently exceeding $7,800. What can you do if you need to arrange a funeral but don't have the money available? You have several options, including taking out a personal loan. Here is what you need to know.

Funeral Expenses: What to Expect

Under federal law, a funeral home must provide you with a list of potential costs in writing before you commit to them. You can also request prices over the phone. With certain exceptions, you have the right to choose only the services you want.

While prices and services can vary depending on the funeral home you choose and where you live, these were some of the average costs in 2021, according to the National Funeral Directors Association:

• Basic services fee: $2,300
• Transfer of remains: $350
• Embalming: $775
• Other preparation that might be done for the deceased: $275
• Use of facilities for the viewing: $450
• Use of facilities and staff for the funeral service: $515
• Printed materials for the service: $183
• Metal burial casket: $2,500
• Car or van associated with services: $150
• Hearse use: $350
• Vault: $1,572
• Cremation casket: $1,310
• Cremation fee: $368
• Urn for storage of ashes: $295

As you can see, depending on which services you choose and how involved the funeral is, it can become quite expensive. The Federal Trade Commission (FTC) offers a checklist you can use to keep track of costs and see how they add up.

Personal Loans for Funeral Expenses

It's possible to get a personal loan for funeral expenses—including loans if you have bad credit. Note, however, that these loans come with costs, as any personal loan would. With a personal loan, you can pay for the funeral upfront, but you'll be committing to making payments for months or years into the future until the loan is paid off.

Funeral loans, as they are sometimes called, can be used to cover the cost of the service, preparation of the body, burial or cremation, the casket or urn, and related expenses. As with most other personal loans, you're likely to get a better deal if you have a good credit score. While you can obtain a funeral loan with bad credit, you might need to pay a higher interest rate or accept a loan with a higher origination fee.

Pros and Cons of Personal Loans for Funeral Expenses

Pros of Personal Loans for Funeral Expenses

While some funeral homes offer payment plans, allowing you to pay them over time, that's not always a possibility. If you don't have enough cash available, a personal loan can be one way to cover the entire cost upfront.

On top of that, personal loans often offer fast funding. You might be able to get the money quickly, sometimes the same day you apply. This ensures that you can hold the funeral in a timely fashion.

Finally, in some cases, it can actually be helpful to use a funeral loan if you have poor credit. As long as you make payments on time and in full, a funeral loan can help boost your credit score.

Cons of Personal Loans for Funeral Expenses

While there are good reasons to take out a personal loan for funeral costs, there are also some downsides. First of all, you're getting into debt. If you have bad credit, you might qualify for a loan, but you'll likely pay a higher interest rate and possibly a high origination fee. This can mean extra costs on top of those associated with a funeral.

In addition, you might have to agree to a short repayment term, requiring you to pay off the loan relatively quickly and straining your financial resources in the meantime.

And, of course, if you can't make your payments, it could have a serious impact on your credit score and your ability to borrow for other purposes in the future.

How to Take Out a Personal Loan for Funeral Expenses

Getting a personal loan for funeral expenses is similar to getting other types of personal loans. Here are some of the steps you'll want to take:

1. Start by deciding if you need a loan to cover the expenses or can come up with the money in some other way.
2. Make a list of all of the potential funeral expenses. Understand what costs you'll incur so you know how much to borrow. While you might be able to get a funeral loan with relative ease, it's best not to borrow more than you need.
3. Compare different loan options and features, ideally from three to five lenders. If you have bad credit, find out which lenders have minimum credit score requirements that you can meet.
4. Gather any documentation the lenders require, which may include pay stubs, W-2 forms, and other proof of income.
5. Before moving forward with a particular loan, review all of its terms, including any fees, and make a note of when the first payment will be due.
6. Complete the application and submit it.

It can be difficult to focus on financial matters during this challenging time, but doing so can help you avoid mistakes you'll later regret.

Alternative Options to a Funeral Loan

A funeral loan isn't the only option available when you need to cover the costs associated with honoring a loved one. Here are some alternative ways to pay for a funeral.

Work With the Funeral Director

Depending on the situation, a funeral director might be able to help you with a payment plan to break up the total cost and make it more manageable. You can also work with the funeral director to find lower-cost options for the funeral and its related services.

Life Insurance

If your loved one was covered by life insurance, the death benefit might be enough to pay the cost of the funeral. In some cases, the deceased might even have funeral or burial insurance, which is designed to cover those costs.

Emergency Fund

If you have an emergency fund, you might be able to use it to cover funeral expenses. But try not to drain the fund to the point where you'd be in a difficult situation should you face an immediate emergency.

Memorial Funds and Crowdfunding

Don't forget that you might be able to use crowdfunding to raise money to help cover the costs of a funeral. Additionally, some funeral homes will help you set up a memorial fund that can help you pay for the funeral. With these options, friends and family can contribute. This can be a way to defray the funeral costs while giving other loved ones in the deceased's network a way to show their respect and honor the family.

Government Help

Some local and state governments offer help for funeral costs. The U.S. Department of Veterans Affairs also provides burial benefits to eligible current and former service members and their families.

Additionally, until 2025, the federal government is offering up to $9,000 to help pay for funeral expenses associated with COVID-19. If you meet the requirements and can show that the death was related to COVID-19, you might be able to tap into those funds.

Credit Cards

Another option, if you have enough available credit on a credit card, is to use it to pay for the funeral. This is still a type of debt, of course, but it might be a fast way to cover the cost. If you earn cash back or other rewards, using a credit card might also make sense.

If you decide to use a credit card, though, it's important to consider the cost. In many cases, a credit card's interest rate will substantially higher than the rate for a personal loan. If you can get a 0% promotional annual percentage rate (APR) on a new credit card, however, you might be able to save money. But make sure you can pay off the debt before the promotional period ends and a higher interest rate kicks in.

Other Loan Products

There are other loan products available for expenses like funerals. But be careful. Payday loans, for example, often have exorbitant APRs, potentially trapping you in a cycle of debt long after the funeral has passed.

A home equity loan or home equity line of credit (HELOC) can be another option if you own a home. While it will likely come with a reasonable interest rate, bear in mind that you'll be putting your home up as collateral and could risk losing it if you're unable to make payments.

The Bottom Line

Funerals can be expensive, and survivors are often unprepared for the cost. If you decide to use a personal loan to cover funeral expenses, carefully consider your loan options and see if there are other steps you can take to reduce your need to take on debt.