Maternity leave personal loans can provide new parents with the extra cash they need. An infant first days are precious. Why allow a temporary loss of income to ruin your joy?
Getting an approval is easier while mom is still working and making money. The requirements are stricter for the couples who start the process after mom stops working.
Follow this three-part outline to identify your optimal maternity leave loan strategy.
- Approvals and requirements for pregnant moms still working
- Getting new loans despite the fact mom is earning less money
- Restructuring repayment schedules to free up cash
Personal Loans for Pregnant Mothers Still Working
The best time for pregnant mothers to take out a personal loan to fund maternity leave is when she is still working. Having an ongoing income and active employment offers the best odds for an approval.
Parents excepting an upcoming temporary disruption in income have unique requirements and needs. Explore alternatives if you are unable to obtain an approval to fund your needs.
Start a maternity leave personal loan request here to fund your unpaid time away from work.
Complete the online form by providing honest answers to each question. An affiliate partner will present your qualifications to a network of companies. Quantity increases your chances for an approval. Every lender has unique authorization processes and targets different borrower profiles.
Expectant mothers gain more approvals when they start the request when still working. In addition to assessing your credit score, the bankers may verify your income and employment situation. Obviously, the employment verification goes more smoothly before mom delivers her baby.
Two critical maternity leave loan requirements can help pregnant moms determine whether borrowing money is the right move to make. The extra cash should help you enjoy the time bonding with your new baby. It should not create a financial crisis.
- The lender will require the first payment approximately 45 days (8 weeks) after closing and disbursement. Budget accordingly. Estimate your added expenses and the length of time you will be out of work without at least one income (see reasons below).
- Plan to make the first few monthly payments using the funds from the disbursement. Include these monthly amounts in the budget.
- Validate that your employer will hold your job open. Many new parents require two incomes to make ends meet. Legal job protections average twelve weeks. However, the laws in the United States results in widely varying outcomes when mom seeks her return to work.
Maternity Loan Reasons
Expectant mothers have several reasons to take out a personal loan to get extra money for her parental leave. New parents often face a combination of extra expenses coupled with lost income. This one-two combination stresses those families already living check-to-check.
Borrow enough money to cover the extra expenses and the projected lost earnings. However, do not go overboard. Keep the original principal low enough to ensure affordable monthly payments.
Leave yourself a cushion in case something happens. Do not assume that bad things only happen to other people. Plan accordingly.
- 25% of women must stop working early due to pregnancy complications.
- 12% of babies deliver prematurely with low birth weight or a serious illness.
Pregnant mothers should budget and forecast extra expenses associated with unreimbursed medical care and needed new baby stuff.
- Large unpaid medical bills could result from mom’s hospital labor and delivery.
- Premature or sick babies spending time in the NICU often result in larger hospital bills.
- Many first-time parents need to purchase and fund extra baby items and services
- Car seats
- Changing table
Expectant mothers and fathers should also budget and forecast the length of parental leave. The growing family may have to go without one income, and sometimes two during this entire time. Several variables, inside and outside of your control, influence the number of weeks with diminished resources.
- Pregnancy disability leave for mom before her due date could last months
- Recovery from childbirth averages 6 to 8 weeks
- The care of a sick infant could last indefinitely
Unsecured personal loans for maternity leave are not always an option. Online lenders and brick-and-mortar banks want to see good credit scores and a solid reliable income stream.
Families who do not qualify often consider payday, 401K, and medical loans.
Online payday loans for maternity leave are a terrible idea for parents in the United States. However, they work slightly better for new moms and dads in Canada.
Payday lenders provide an immediate infusion of cash in exchange for a postdated check, or authorization to debit a checking account. The lender does not charge periodic interest but does charge a fee each time the contract renews – which is most often weekly or biweekly.
Therefore, the payday loan may roll over multiple times before mom can return to work. The fees add up quickly. It could be difficult to discharge the obligation.
- Canadian families can rely on baby bonus payments – if eligible1
- USA families have no such entitlement program to borrow against
A 401K loan is another dicey option for getting money to fund a family medical leave. According to IRS regulations, an employee can suspend 401K loan payments for up to 12 months during a leave of absence from work.
You could lose your job, or decide to be a stay at home mother. If this happens you must repay the amount in full immediately, or the IRS will treat the outstanding amount as a distribution. You may have to pay a penalty and owe taxes on a distribution.2
Your employer’s Flexible Spending Account (FSA) provides a wonderful opportunity for expectant mothers. They can gain an interest-free maternity leave loan with guaranteed acceptance, no consumer report pulls, hard inquiries, or concerns about default.
Most health insurance plans come with deductibles, copayments, and other cost-sharing options. Mom’s labor and delivery may generate significant amounts of unreimbursed medical expenses, which qualify for FSA reimbursement.
If delivery occurs towards the beginning of your FSA plan year, your employer must immediately reimburse any qualifying medical expense. You may have up to 52 weeks to repay the borrowed amount using pre-tax payroll contributions. Use of pretax elections equates to an interest rate well below zero.
Your employer guarantees acceptance, even if you have bad credit. If you leave your employer before making full repayment, the employer has no recourse to collect the outstanding funds, and cannot report the missing amounts to the credit bureaus.
Getting New Loans While on Maternity Leave
Getting any new loan is more difficult while on maternity leave. Mom is no longer working and faces uncertainty about when and if she will return to the job. Lenders shy away from ambiguity.
You may find the rules for unsecured personal loans are more stringent than for secured mortgages.
Getting Personal Loans
Getting an unsecured personal loan during maternity leave is possible for some families. Lenders often accept requests from couples who have a strong credit history and with at least one ongoing income.
- People with very high credit ratings can often borrow significant amounts without having to verify income and employment. Go for it if you have a FICO score above 700.
- Couples with lesser ratings can qualify based on the father’s ongoing earnings. While many men also take paternity leave, they have far more workplace flexibility. Dads do not have to worry about pregnancy complications, bed rest, or recovery from labor and delivery interfering with work.
- Stay at home moms should attempt to qualify using their husband’s salary and credit credentials. Stay at home mothers do honorable work. However, they lack one important prerequisite – a direct source of earnings.
- Couples adopting a baby also have greater borrowing flexibility. Although both parents may choose to take adoption leave, neither mom nor dad suffers a pregnancy-related disability.
Home Loan Applications
Applying for a conventional home loan during maternity leave is somewhat easier because of the collateral, longer terms, and government involvement.
- Mortgages use collateral to secure the contract. The equity in the home is the collateral, which the lender can repossess in the event of default. The lower default risk means that a temporary disruption in income is less worrisome to lenders.
- Mortgages have longer terms: 15, 20, or 30 years are the most common. A 6 to 8-week recovery from childbirth is relatively insignificant in comparison.
- The federal government influences mortgage applications during a family leave of absence. The Department of Housing and Urban Development (HUD) enforces the Fair Housing Act, which prohibits discrimination based on familial status (pregnancy or children in the family). HUD’s Federal Housing Administration (FHA) requires lenders to review applicant income to determine if they can make their mortgage payments.3
- FHA-insured lenders treat applicants on maternity leave or short-term disability as follows:
- Document their intent to return to work
- Verify their right to return to work
- Confirm they can make payments based on their reduced earnings
- Fannie Mae issues similar written guidelines for applications while on temporary leave.4
- FHA-insured lenders treat applicants on maternity leave or short-term disability as follows:
Maternity Leave and Loan Repayment Modifications
Adjusting loan repayment schedules is the final way to free up money while on maternity leave. New parents can suspend payments temporarily in the course of a period of financial distress. However, the delay comes at a price. The interest often continues to accumulate.
Student, mortgage, and car loan modifications are the final two options to explore.
Student Loan Repayment
If you have an outstanding federal student loan, you may be able to modify the repayment schedule during maternity leave. This option could help free up cash by reducing monthly payments temporarily. New parents can pursue deferment or forbearance.
New moms and dads can qualify for student loan deferment if they can document economic hardship or unemployment. Under a deferment, interest does not accrue on any subsidized accounts.
Mothers and fathers of new babies can also opt for student loan forbearance. Under a discretionary forbearance, borrowers can suspend payments for up to twelve months. However, interest will continue to accrue. Graduates can request general forbearance if they meet any of this eligibility criteria.5
- Financial difficulties
- Medical expenses
- Change in employment
Unfortunately, economic hardship is a reality for many new parents. Lost income combined with changes in employment and extra medical expenses add up to financial difficulties. Student loan deferment and forbearance ease some of the pain.
Mortgage Repayment Modifications
Mortgage repayment modifications are is the final way for new mothers and fathers to find extra money in their budget during parental leave. Be careful before modifying any mortgage terms, as you do not want to lose your home now that you have a new baby.
Choose between a modification program and forbearance.6
- The Making Home Affordable Modification Program (HAMP) is available for new parents experiencing long-term financial hardship such as job loss or medical bills.
- Mortgage forbearance is a better fit for new parents experiencing a temporary reduction in income, who expect to resume working at their full-time position.
Car Payments & Insurance
Finally, modifying your car payments and auto insurance is the final option to free up extra money during maternity and paternity leave of absence. Refinancing, forbearance, and changing your insurance driver profile are viable alternatives.
- Refinancing an existing car loan while an expectant mom is still working can lower monthly payments. Keep in mind that extending the term equates to higher interest charges over time.
- Many auto finance companies will allow drivers to skip one or two payments in the midst of financial distress periods. Call the lender and explain your situation. They will tack the missed amounts onto the end of the contract. Expect to pay more in interest if you choose forbearance.
- Many mothers change their commuting habits while on maternity leave of absence. Auto insurance companies price premiums based on the number of miles driven during peak hours. Families can lower rates temporarily based on changed driving patterns.