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Personal loan approvals for people relying on disability benefits hinge on the regular government check rather than proof of employment. Lenders love the reliability baked into these publicly-funded programs!

However, requesting a small principal amount is the second critical factor. Individuals with low fixed incomes do not qualify to borrow vast sums of money.

Both Veterans and Social Security Disability recipients can choose between installment contracts with monthly payments and cash advances with shorter terms. Meanwhile, former service members should tap other government support programs first to keep loan amounts as affordable as possible.

Loans for Social Security Disability

Personal loans for people receiving Social Security disability benefits can take several forms. Plus, winning approval requires unique strategies depending on your credit history and the type of program providing income support.

  • Social Security Disability Insurance (SSDI) covers workers who paid into the system via FICA taxes payroll deducted by employers. It pays out an average of $1,200 each month.
  • Supplemental Security Income (SSI) addresses the needs of adults and children who have limited earnings and resources. It pays an average of only $600 monthly.

No Job

Disabled veterans and SSDI recipients can request a personal loan with monthly installments. (Affiliate Link) Select “Benefits” as your income source in the online form. Lenders have no job requirements or employment verification rules when the federal government issues support checks every month.

Installment contracts with monthly payments are viable for individuals receiving SSDI because the slightly higher benefit allows for some discretionary spending above basic needs for food, clothing, and shelter.

Set a strict budget and do not borrow more money than you can comfortably repay in the time allotted. People on fixed incomes with no job have little room for error.  The consequences of default could be dire.

Bad Credit

Personal loans for disabled people with a bad credit history will prove challenging to find because you have two strikes against you.

  1. Your debt-to-income ratio is automatically very high because the denominator (earnings) in the fraction is small when you rely on government benefits exclusively
  2. Adverse payment records (delinquency, judgments, repossessions, foreclosure, or bankruptcy) appearing on your consumer report make you a high risk of future default

However, a bad credit score does not mean strike three. The federal government can print money, which means your checks keep coming despite recessions, depressions, pandemics, earthquakes, hurricanes, and other acts of God. Lenders treasure certainty!

Therefore, boost your approval odds by making reasonable requests: small amounts and short repayment terms such as with payday loans.

Payday Loans

Payday loans are the only viable alternative for Supplemental Security Income (SSI) recipients because of two main reasons.

  1. The small dollar amounts are less likely to jeopardize access to continued benefits. SSI rules prohibit any individual from holding more than $2,000 in countable resources in a bank account or stored on a Direct Express debit card.[1]
  2. The tiny average $600 monthly SSI check leaves little room for monthly loan repayment after satisfying your basic needs such as food, clothing, and shelter

However, this method of borrowing has major caveats, which means that you should only take out payday loans for true emergencies when you need money fast such as, car repairs, legal fees, or medical expenses.

Cash Advance

Payday loans work like a cash advance against your next SSI payment. In other words, you simply get your money sooner. Perhaps it arrives in 24 to 48 hours instead of up to 30 days later when the scheduled check deposits into your checking account or prepaid debit card.

However, cash advances are an expensive and dangerous way to borrow money if you rollover the loan too many times. A rollover means you fail to repay the full balance immediately after your next scheduled SSI payment.

For example, say you take out a $200 cash advance and pay an origination fee of $30 (15% of the original principal). The lender gives you $170, and you owe $200 back when your SSI check arrives no more than thirty days later.

  • If you pay the full $200 back at that time, the transaction costs you only $30 – which could be more affordable than a rental eviction or banking overdraft fee.
  • If you rollover the loan, you pay an additional $30 origination fee, and things begin to spiral downwards because the same thing might happen again after another thirty days, and so on.

Debit Card

SSI recipients without a bank account can take out a payday loan by using their Direct Express debit card instead. The application process is nearly identical except that you must provide the card number and PIN rather than a routing and account number.

If approved, the lender will transfer funds quickly to your debit card, which you can then use to address your emergency need. Of course, you must pay the full balance shortly after receiving your next SSI payment to avoid rollover fees and the debt snowball, which could ensue.

Loans for Disabled Veterans

Personal loans for disabled veterans work the same way as noted above. However, the people who bravely served our country in uniform have access to additional forms of government support that reduces the amount of money borrowed, which helps immensely with approvals.

First, you can tap into three different sources of income support, which improves qualifications when you can combine the Veterans Administration (VA) benefits with SSDI.[2]

  1. Disability compensation for an illness or injury that happens or worsens by your military service
  2. A VA pension for low-income warriors with infirmities that are not service-related
  3. Social Security Disability Insurance (SSDI) for those who cannot perform any substantial gainful activity

Second, other government programs make it easier for former service members to start a business, buy a home, and make modifications to a car.

Home

Disabled veterans needing a mortgage to finance the purchase or renovation of a house may not have to borrow as much money. Former military personnel with service-related and age-connected impairments may qualify for grants to help you modify an existing or new residence.

  • Build an adapted house to accommodate physical limitations
  • Widen doorways and install ramps for wheelchair access
  • Other alterations that foster independent living

Auto

In a similar vein, disabled veterans may get away with borrowing less money on a car loan – especially when extra customizations allow you to drive safely or enter and exit the vehicle unassisted.

Three VA programs can lower the cost of vehicle ownership and usage.

  1. Automobile allowance for service-connected injuries
    1. Adaptive equipment
    2. Grants to pay for vehicle
  2. Vehicle modifications for non-service-related ailments
    1. Vehicle lifts
    2. Wheelchair tie-downs
  3. Driver training classes for specially adapted vehicles

Business

The Small Business Administration (SBA) Office of Veterans Business Development (OVBD) promotes entrepreneurship on behalf of former service members, including those with disabilities.[3]

Several OVDB initiatives provide access to capital and preparation for startup businesses and ongoing concerns.

  • The Lender Match program points to banks who could fund business loans
  • Multiple efforts provide the training needed to transition from a military role to an independent business person
  • Federal government agencies set aside acquisitions for exclusive competition among service-impaired, veteran-owned small businesses

Footnoted Sources:

[1] SSA.gov Spotlight on Loans

[2] USA.gov Veteran Disability Benefits

[3] US Small Business Administration