Personal Loan Need to Knows for Single Mothers

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Whether you’ve been a single mom since day one or are in the process of becoming a solo parent, raising a child on your own is expensive. Housing, essentials, and extracurriculars add up. Add in unplanned days off for childcare, major expenses like dental work and medical insurance, or expenses like legal bills during a separation, and you may find yourself with your finances stretched thinner than you’d like.

One option to consider is a personal loan that is paid back with interest in monthly payments. When approved, a borrower receives a lump sum of cash they can then use as they would like. Some people use a personal loan to pay down other, higher-interest-rate debt. But other people use a personal loan for a large purchase or to help pay current bills.

Why Might a Single Mom Need a Personal Loan?

There are many reasons why a single mother — or any parent — might need a loan. But sometimes people facing a financial shortfall may turn to a personal loan to help them get through a particular circumstance. This might include:

1.    Consolidating debt.

2.    Moving expenses.

3.    Tuition or extracurricular expenses for children.

4.    Stopgap during times of unemployment.

5.    Housing costs, such as rent or a mortgage.

6.    Home remodeling costs.

7.    Vehicle purchase.

8.    Appliance purchase.

Of course, there are many other reasons as well, and there’s no wrong reason why single moms might feel they need more money. But considering what a personal loan is to be used for can help you assess next steps. Depending on where you apply for a loan, you might need to share the reason for applying, which may then be cross-checked during the application process.

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Are Personal Loans for Single Mothers Special?

In a word, no. The process of applying for a personal loan is the same for everyone. But there may be hurdles to overcome as a single parent.

•   Credit score. Separation and divorce, as well as putting expenses on a credit card and not paying down the balance, may adversely impact a credit score.

•   Income. If an applicant doesn’t have steady income, it may be harder to be approved.

•   Budget. If a borrower has trouble paying their current bills and is looking for a personal loan to help cover expenses, then a personal loan may be a short-term fix for single-parent budgeting that could potentially get a borrower deeper into debt.

Benefits and Risks of Personal Loans for a Single Mother

There can be a lot of financial pressure on a single parent responsible for all family expenses. If a single parent lost a job, how would expenses, including paying back a personal loan, be covered?

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But for certain circumstances, a personal loan may be an option to consider. For example, maybe a single mom had lawyer bills pile up during a separation, but has downshifted her expenses and has enough liquid income to cover expenses, but not a large bill all at once.

A personal loan may also make sense if someone’s life is currently in flux: They plan to downshift their life, but need money to remodel their current home to rent out or have a roommate move in, or need money to consolidate high-interest credit card debt and potentially lower the amount of money they have going toward bills each month.

Personal loan interest rates tend to be fixed, rather than variable, which is one factor that may make a personal loan a more attractive choice than putting expenses on a credit card.

The interest rate you’re charged on a personal loan won’t change during the term of the loan, and you’ll know exactly how much money you’ll be paying back each month. Interest rates also may be lower than credit card interest rates, especially if a borrower has good credit.

And because the money from a personal loan is cash in a bank account, it may be easier to pay certain expenses, such as housing expenses, than it would be with a credit card.

Considering the risks and benefits for your situation can help you decide whether a personal loan is right for you. Some things to ask:

•   What budgeting strategies do you currently have?

•   Will the loan payment fit into your current budget, or do you have a plan to increase your income to be able to afford the loan payment?

•   Does the loan have any programs for unemployment or hardship? What other options might be available? These may include, depending on circumstance, borrowing from family, downshifting elements of your lifestyle, looking for hardship/assistance programs, or boosting income.
Pros and Cons of Personal Loans for Single Mothers

ProsCons
Can pay down large bills that need to be paid in full.Can be challenging to juggle another monthly payment, especially if already financially stretched.
Can consolidate other debts and have a fixed sum each month to pay, at a potentially lower interest rate.Can be challenging to secure a personal loan without steady income or if you’re still building credit.
Can give access to a lump sum of cash for needs such as renovations or tuition.Can add to stress, especially if income is unstable or in flux.

Is Getting a Personal Loan With No Income Possible?

When applying for a personal loan, you’ll be asked for your income, your reason for applying for the loan, and maybe your tax returns or W2s to verify your income. The lender will run a hard credit check on your credit report to assess your creditworthiness. If you’re looking for a personal loan, but are a single mother with no job or have been a stay-at-home-mother and have a lackluster credit history, these may be difficult-to-overcome hurdles during the application process.

If you don’t have an income, then you might consider a cosigner or co-applicant for your loan, who agrees to make the loan payments if the main borrower cannot or does not. For some borrowers, family members have the financial flexibility to cosign on a loan, but it can be a good idea to have a conversation about expectations and potential hypotheticals if you were no longer able to pay back the loan.

Alternatives to Personal Loans for Single Mothers

There are other alternatives to personal loans, depending on your financial circumstances and your needs.

Home Loans for Single Mothers

If you own your home, using your home as a financial asset may be one way to pay down bills. Tapping into the value of your home with a home equity loan or a home equity line of credit, or by refinancing your home are some options to consider.

Federal Grants and Aid

If your income and certain other resources meet eligibility requirements, you may be eligible for federal grants and aid. This can include everything from the Temporary Aid to Needy Families (TANF) program to food and housing assistance, among others. The benefits.gov  website offers a list of programs and eligibility requirements.

Educational Aid for Single Mothers

If you’re considering going back to school, it may make sense to look at federal student loan programs  . There also may be private scholarships and grants available for single parents, available from the institutions you’re interested in. Speaking with the financial aid office may help you see the breadth of options available to you.

Other Financial Help For Single Mothers

Becoming a single mother, either by choice or circumstance, can feel overwhelming. But there is support out there. Talk to other single parents in your community: You may be surprised by resources that are available. Other opportunities may include:

•   Private grants or statewide grants. As with any grant you apply for, it may be a good idea to research the grant and make sure it’s legitimate. Some scams may prey on vulnerable people by trying to get them to share personal information. For example, a grant should never ask for your bank account information in an application.

•   Financial aid or tuition assistance. If your children are in private school or extracurriculars, there may be financial aid. Even if there’s not a formal program, it can’t hurt to explain your situation and ask what may be available.

•   Employer-based programs. Your human resources department may have certain programs, including childcare coverage, for eligible workers. Talk to your HR representative or look through their materials to assess. This may include free legal consultations, childcare coverage, or access to financial planning, as well as access to counseling.

•   Family and friends. Family and friends may be willing to provide support, or there may be creative ways to trade services, such as babysitting, for financial support. It can be helpful to put an agreement in writing and follow up occasionally to assess how the arrangement is going.

Recommended: Options for When You Can’t Afford Your Child’s College

The Takeaway: Personal Loans With SoFi

There are avenues that can help you manage your finances and achieve your financial goals. The right one depends on your circumstances. Deciding to take out a personal loan is a personal decision that depends on your financial situation now, as well as your goals for the future.

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

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