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Personal loans for maternity leave can help new parents bond with their newborn baby without the financial pressure of having to return to work too soon.

Your newborn is in the infant stage for a fleeting moment. Make the most of this precious time without worrying about bills.

Taking out a loan is easy. Have the correct documentation ready and choose an amount that you can afford after you return to work.

However, repaying the lender can get messy if you lose your job or health issues affect mom and or her baby. Learn your FMLA rights before hitting the submit button.

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Taking Out Maternity & Baby Loans

The process of taking out a personal loan is simple. You complete an online form and a network of finance companies will review your credentials.

If approved, the lender will deposit money into your checking account. Use the funding to offset lost income during maternity leave and cover extra baby-related expenses.

Approval Tips

It’s easy to get a personal loan! (Affiliate Link) Follow these personal loan approval tips to make your maternity leave and time bonding with your newborn baby more rewarding. Get your documentation ready and request an amount you can afford to repay in equal monthly installments.   

Documentation

Be prepared with the correct documentation before completing the online request form. Lenders approve individuals rather than couples or households. Therefore, borrow under the name of the parent with the best borrowing credentials (mom or dad), and have this information handy.

  • Driver’s license number
  • Social Security number
  • Bank account and routing number
  • Annual income estimate
  • Employer name, address, and phone number

Amount

Keep the requested principal amount of your loan as small as possible. Lenders are more likely to approve applicants with low debt-to-income ratios (your periodic payments divided by income).

Consider these factors when budgeting an affordable amount to borrow.

Bad Credit

New parents-to-be with a bad credit history are more likely to qualify for a loan when they start the application process before maternity leave starts. In other words, begin well before the projected due date for your newborn baby.

Families with low credit scores can balance out their poor borrowing qualifications with ample income and solid work history. The lender may want to verify income and employment. Your employer is more likely to provide an affirmative answer before a parent takes a leave of absence rather than during their time off.

401K

A 401K loan is another resource that parents with bad credit can tap. You can borrow money from your retirement plan without a credit check for temporary needs, such as taking unpaid leave from work or funding the purchase of baby stuff.

Keep these IRS regulations in mind before taking out a 401K loan.[1]

  • You can suspend payments up to 12 months during a leave of absence
  • Defaulted payments become taxable distributions
    • 10% early withdrawal penalty
    • Federal income tax owed April 15

Payday

Payday loans are a costly last resort for new parents with bad credit. While they also allow you to borrow money without a credit check, you are setting yourself up for a debt trap.

Payday loans charge an origination fee rather than interest and come due in harmony with your employer’s payroll cycle – typically one or two weeks. However, the average maternity leave lasts six to eight weeks and could continue longer if mom or baby has health problems.

Therefore, the payday loan may roll over multiple times before mom can return to work. The fees add up quickly and it could become impossible to get out of the debt.

Maternity Leave Loan Repayments

Employment security and health are two critical issues affecting your ability to repay a personal loan for maternity leave needs. It could be challenging to pay any bills if one parent loses a job and or a family member suffers from a severe medical condition.

Unfortunately, these two scenarios occur frequently and could happen to you. Therefore, research your legal rights and consider possible health outcomes before borrowing money.

Job Security

Verify that your employer will hold your job open during your maternity leave before taking out a personal loan. Most new parents will need to return to work to afford the added expense during the repayment phase.

Some employers have written policies while others default to legal standards.

  • The Family Medical Leave Act (FMLA) provides twelve weeks of unpaid job protection for eligible employees who work for covered employers (about 50% of new parents qualify)
  • Ten states expand on FMLA rights by covering more workers or by lengthening the time off from work

Loss of health insurance could also impair your ability to repay your loan on time and according to terms. If one parent loses a job, the family may have to take on an extra expense to continue their employer-sponsored healthcare via COBRA.

Health Problems

Health problems are the scariest factor affecting a family’s ability to repay a maternity leave loan. We all hope that things to go smoothly, but that is not always the case. Both mom and baby can experience medical problems.

Keep these possibilities in mind before borrowing money.

  • 18% of women require pregnancy bed rest that causes her to miss months of work before her due date[2]
  • 10 – 20% of new mothers report clinical postpartum depression which could delay her return to the job or affect her productivity[3]
  • 14% of babies deliver pre-term and or spend the first days of their lives confined to a Neonatal Intensive Care Unit (NICU)[4]

Any of these situations could lead to a devastating combination: extended lost income, combined with surprise medical bills, followed by job loss and higher COBRA insurance premiums.

Therefore, think carefully before taking out a maternity leave loan. It could be more trouble than it is worth in the end.

Footnoted Sources:

[1] IRS Retirement Plan Loans FAQ

[2] Sanford Health Bed Rest

[3] Postpartum Depression Statistics

[4] March of Dimes Special Care Nursery Admissions