Most families in the United States face an unpaid family leave. Expenses often rise in tandem. When infants deliver preterm, parents often must extend their time away from the job, and face additional expenses.
Applying for maternity leave personal loans online is a convenient way to create a cushion of cash so that mom and dad can afford to stay at home and bond with their newborn baby.
Of course, borrowing money just before leaving work is a risky financial strategy. You just do not know how long you will be out of work, or if your job will still be there when you are ready to return. Taking out a loan could cause more problems than it solves. Consider all your alternatives, and choose wisely.
Applying for Maternity Leave Loans Online
Applying for maternity leave personal loans online may provide a cushion of cash to help meet your regular bills. The majority of parents in the United States does not enjoy paid parental leave benefits but does experience an increase in expenses from leftover medical bills, and baby related needs.
Personal Loans Online
Apply for a maternity leave personal loan online to begin the process.
Network lenders make it easy for parents to apply for maternity leave personal loans online. Borrowers with good to excellent credit qualifications can get instant approvals, and have the funds deposited in their bank accounts without leaving their computer screen.
The initial term is very short – three to five years. In most cases, there are no repayment penalties, but you must factor in origination fees when calculating your actual annual interest rate. An origination fee of 5% inflates the annual rate if you repay very aggressively, but of course, the total cost is much smaller.
Payday Loans Online
Applying for payday loans online to fund your maternity leave could prove to be a costly option. Payday lenders provide an immediate infusion of cash in exchange for a postdated check, or authorization to debit a checking account. People with bad credit gravitate to these debt instruments, as the lender does not check your credit report or score.
The lender does not charge periodic interest but does charge a fee. Because the amounts are typically smaller, and the repayment terms are very short, the annualized interest rate on the fee looks very scary. However, you do not pay the annualized interest rate unless you roll the loan over multiple times.
Borrowers get themselves into trouble when they are unable to repay the full balance during the initial term – which synchronizes with your payroll cycle. The transaction is far more affordable for dad than for mom, as mom may miss eight weeks of paychecks. Proceed with caution.
Alternatives to Taking out Maternity Leave Loans
Before taking out personal loans for maternity leave from an unknown third party lender, consider some alternatives that may prove safer and more affordable. Without paid maternity leave benefits, you must consider the pros and cons of using your employer’s flexible spending account, 401K plan, and deferring your federal student loan payments.
Flexible Spending Account
Your employer’s Flexible Spending Account (FSA) provides a wonderful opportunity to 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 loan 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 payments to the credit bureaus.
If you have accumulated a significant balance in your 401K plan, you may consider taking a loan for your maternity leave. Be very careful with this approach. It is fraught with hidden dangers.
Not everybody enjoys job protection rights, and the rights do expire for those lucky enough to qualify for FMLA or a similar state maternity leave law.
You could lose your job during maternity leave, or decide to be a stay at home mother. If this happens you must repay the loan in full immediately, or the IRS will treat the outstanding amount as a distribution. You may have to pay a penalty, and may owe income taxes on the distribution.
Student Loan Deferment
If you have an outstanding federal student loan, you may be able to defer making repayment during maternity leave. Direct and Family Federal Education Loans (FFEL) allows borrowers to defer repayment during parental leave, or while temporarily disabled.
Dad may be able to defer his student loan while on parental leave, and mom may have three reasons to qualify. She meets the criteria for family leave, temporary disability, and being a working mother may permit her to suspend payments temporarily.
Keep in mind that you still owe the money, and additional interest may accrue on your outstanding amount. However, the reduction in monthly expense may help. Contact your servicer for deferment approval.
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