What is a funeral loan and how do you get one?

When you’re dealing with the grief of losing a loved one, the added stress of paying for funeral services can make what’s already a difficult time even worse. If your loved one’s estate doesn’t have the resources to cover the final arrangements, you do have options to help cover the cost of burial or cremation.

Here’s what to know about funeral loans, and some other ways you can cover funeral expenses.

• What is a funeral loan?
• How to take out a funeral loan
• How much does a funeral cost?
• Who is responsible for funeral costs?
• Funeral loan alternatives

What is a funeral loan?

A funeral loan is a personal loan that you can use to cover the significant costs of a funeral, as well as burial or cremation. They’re generally no different from any other personal loan.

Like all personal loans, you’ll borrow a specific amount of money which you’ll receive upfront. Then, you’ll repay the loan with monthly payments at a fixed interest rate, meaning your payment amount won’t change.

Interest rates for personal loans are generally lower than credit card interest rates. Most personal loans usually don’t require any collateral, so you don’t risk your assets if you fail to make your payments.

How to take out a funeral loan

If you’ve determined that a funeral loan is the best way to pay for your loved one’s final arrangements, here are the steps you should follow to take out a funeral loan.

Step 1: Make a list of priorities

Your loved one’s will may include details on their wishes for funeral services, and whether they’d prefer to be buried or cremated. During this time, you and your family can also decide whether you’d like to host a viewing or a memorial service.

Step 2: Get several funeral cost estimates

Before borrowing money, make a list of what you’ll need to pay for and what each item costs based on the priorities you’ve put together. This list could include a casket, headstone, funeral service fees, and other funeral-related expenses. Your funeral director will be able to help you choose between the options you have for each category and determine the price.

During this step, it can also be helpful to speak with several funeral homes to find the best fit. Funeral directors should also be able to help you understand where you can reduce costs.

Add up the costs for the list you’ve created. This will show you how much money you’ll need to borrow.

Step 3: Check your credit score

Your credit score will be a major factor in whether you’ll qualify for a funeral loan and the interest rate a lender will offer. Higher scores yield more options and better rates. A fair credit score may have fewer options, and having bad credit may make it hard to qualify for a personal loan.

You can find out your credit score by requesting free copies of your credit report from the three major credit bureaus — Equifax, Experian, and TransUnion — by visiting AnnualCreditReport.com.

When you receive your report, review it carefully for any errors, like incorrect balances or current accounts listed as past due. If you discover incorrect information, you can dispute the items with the credit bureau and have it corrected. This may boost your score. If you’ve had a bankruptcy in your recent past, you may need to wait before you can qualify for a personal loan.

Step 4: Get prequalified with several lenders

Personal loan lenders generally allow you to prequalify for a loan by filling out a short form, usually including your Social Security number. The lenders will do a soft pull on your credit to review your file, meaning your score shouldn’t be affected. With this information, the personal loan lenders will let you know if you’re likely to qualify for a loan and quote an interest rate.

Step 5: Choose the best fit

Review the loan offers you receive carefully, looking at things like the interest rate, length of time you have to repay the loan, and any fees the lender may charge. Your loan offers will typically also include an estimated monthly payment amount. Choose the loan offer that best fits your budget and needs.

Step 6: Apply for the loan

The lender you select will provide instructions on how to complete a full loan application. You may be asked to disclose more information about your finances and provide documentation to verify your income or employment, such as W-2s, pay stubs, and bank statements.

Step 7: Close on the loan and receive funds

In many cases, personal loan lenders will deposit your loan funds directly into your bank account. The amount you receive will already have any loan fees deducted from the total.

Once the money is in your bank account, you can use it to pay for the funeral expenses you’ve outlined in the first few steps. You’ll also get details on when you need to start paying the money back. Most lenders offer an autopay option, where your monthly payment is automatically deducted from your account on the due date.

How much does a funeral cost?

Funerals can be expensive. The average cost of a funeral in 2021 was $7,848, according to the National Funeral Directors Association. These costs don’t include additional fees like headstones, cemetery fees, flowers, and running an obituary.

The following costs come from the National Funeral Directors Association’s annual list. Costs may vary by region of the country.

Traditional funeral costs

• Services fee: $2,300
• Removal and transfer of remains to funeral home: $350
• Embalming and preparation for viewing: $1,050
• Use of facilities and staff for the viewing: $450
• Funeral ceremony: $515
• Hearse: $350
• Service car or van: $150
• Memorial printed package: $183
• Metal casket: $2,500

Funeral costs with cremation

• Basic services fee: $2,300
• Removal and transfer of remains to funeral home: $350
• Embalming and other preparation: $1,050
• Use of facilities and staff for viewing and funeral ceremony: $965
• Cremation fee: $368
• Service car or van: $150
• Memorial printed package: $183

Who is responsible for funeral costs?

Family members of the deceased are typically responsible for planning and paying for the funeral services. But your loved one may have designated a specific person, or agent, who will take responsibility for the process and communicate with other family members about the arrangements.

In many states, people can prepay for their funeral to help lessen the financial burden on their family members when they pass away. In some cases, this money is held in a trust. In other cases, the person will buy an insurance policy that will cover the costs of a funeral and burial or cremation.

Funeral loan alternatives

A funeral loan isn’t the only option you have to pay for funeral expenses for your loved one. The following may be a better fit, depending on your situation:

• Life insurance — Your loved one may have a life insurance policy that pays out to a beneficiary when they pass away. You can use the payout of this policy to pay for the funeral services. The policyholder may also have a particular form of life insurance known as burial insurance. These policies usually have a small value — between $5,000 and $25,000 — and are intended to be used to pay for funeral expenses.
• Tap into an emergency fund — It’s a good policy to maintain at least three to six months’ worth of your regular spending in an emergency savings fund for unexpected expenses. If you have some money saved, you may be able to use it to help cover the costs of services without going into debt.
• 0% intro APR credit card — Some credit cards offer low- or 0% interest APRs for a period of time. You may be able to use such a card to pay for funeral expenses, particularly if you feel confident that you can pay off the balance in a relatively short period of time. Keep in mind, the interest rate on these cards jumps significantly after the introductory period is over. If you haven’t paid off the balance, you may even owe interest dating back to when you first made a purchase with the card.