How to finance a funeral

Home equity loan

If you owe less on your home than it is worth, that means you have equity, and that equity can help with financing a funeral. Let’s say your home is currently worth $300,000, but you owe $200,000. You have $100,000 in equity. Typically, a lender will loan up to 85% of that equity, or in this case, $85,000. You receive the money in a lump sum and repay it in equal monthly payments. Depending on the size of the home equity loan, it may take you anywhere from five to 30 years to repay the debt. Because the bank uses your home as collateral, the interest rate on a home equity loan is likely to be low. However, if you miss payments, the lender has a legal right to repossess the property.

Home equity line of credit (HELOC)

Like a traditional home equity loan, a HELOC is based on the equity in your home, and your home acts as collateral. A HELOC differs from a home equity loan in a couple of ways:

  • A HELOC acts as a line of credit rather than a one-time loan, allowing you up to 10 years to withdraw money as needed, and 20 years to repay those funds.
  • Once you repay any portion of the HELOC, you are free to withdraw the money again.
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Credit card

If your portion of financing a funeral is small, there may be a way to finance it without interest. Say the funeral comes to $10,000, and your share is $2,000. As long as you can pay it off before the end of your billing cycle, you can put the expense on a credit card without paying interest. If the bill is higher or you need a bit longer to pay, apply for a 0% promotional rate credit card. These promotions usually last for 12 to 18 months, so be sure to pay it off before the promotional rate expires. Let’s say you charge $3,600 and have 18 months of 0% interest. If you pay $200 per month, the credit card is paid off by the time the promotional rate expires.

How to finance a funeral

The first thing any traditional lender will require for funeral loans is a loan application, at which point your credit score comes into play. Check your credit report, find out where you stand, and boost your credit score if necessary. Borrowers with the highest credit scores snag the lowest interest rates and are most likely to qualify for 0% promotional rate cards. A high credit score offers you options not available to everyone when it’s time to finance a funeral.

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Important note: If you have agreed to split the cost of a funeral with others, only finance your portion. Do not borrow money to cover anyone else’s part. Sure, people close to you may follow through, but it’s not worth risking having to pay the entire amount back by yourself, and possibly losing a relationship in the process.

When deciding how much to borrow, remember: The relative “fanciness” of the funeral is not likely to matter. What you will find important in the upcoming months are memories of your loved one.

Alternatives to funeral financing

Before paying for anything, check whether the decedent had an insurance policy or prepaid funeral plan to cover the costs. Here are a few other options that can help avoid financing a funeral:

  • Ask family and friends to chip in to cover the cost of a low-cost funeral so that no one has to take out a loan. It is possible that other people will appreciate memorializing your shared loved one by contributing.
  • Skip anything that is not absolutely necessary, like embalming (not every state requires it).
  • Shop online for caskets and other funeral-related items to keep costs to a minimum. You do not have to purchase these from a funeral home.
  • Look into any clubs or organizations the decedent was part of. Some have a special fund to help members, even with final expenses.
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Finally, if you absolutely cannot find the money to bury your loved one, most county coroner’s offices will allow you to sign a release form saying that you cannot afford to pay for the burial. At that point, the county and state will pay to bury or cremate the body.

Losing someone you love is hard enough, and it can certainly be made worse by the myriad of tasks and expenses you face following their death. The best advice is to take it one step at a time, stay informed about your options, and be kind to yourself as you go through one of life’s most significant challenges.

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