Can You Use a Personal Loan to Finance Adoption Expenses?

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Each year thousands of couples yearning for the joy of parenthood take the only step available to achieve it – adoption. In doing so, they willingly trade the anguish of being unable to bear a child for the hope and anxiety of an arduous and expensive process, which has no guarantee of success.

When the decision to adopt is made, prospective parents must endure a wait time that can last as little as several months to as long as several years, depending on their options for adoption and the location of the child. Throughout the process, fees need to be paid – at the beginning, during, and at the end of the process. The combination of paying out significant sums of money and the long wait time only increases the financial strain, especially for couples with modest financial means.

Adoption costs can vary widely, depending on a number of factors. A foster care adoption – adopting a child from a state foster care system – can be as low as $0 to $2,500. But, for a domestic adoption through a licensed, private adoption agency, the cost can range from $5,000 to $40,000.

The same range of costs applies to an independent adoption arranged between a birth mother and a prospective parent. On average, these options for adoption require fees of $15,000 to $20,000 near the beginning of the process, which can climb to $20,000 to $40,000 by the end of the process.

These fees don’t include other adoption expenses, such as a home study course (required for all types of adoption), legal fees, and travel. Foreign adoptions can require foreign attorney fees as well as passport and visa fees.

»​ Looking to finance adoption expenses? Check out LightStream’s Personal loans for adoption financing!

Financial Help for Adoptions

Adoption is a huge personal commitment requiring a significant financial commitment. While some couples have other funding sources, such as family and savings, to get them through the process, many do not. They could choose to wait, perhaps many more years, until they have the savings; but many couples don’t want to give up the years they could be spending bonding as a family. Fortunately, there are several funding and financing sources available, providing the means for adoption at a reasonable cost.

Help From Uncle Sam

A significant portion of adoption expenses can be covered by the adoption tax credit, which is used to reimburse adoptive parents for qualified expenses. Parents with an adjusted gross income (AGI) equal to or less than $201,920 are eligible for the credit. A reduced tax credit is available for parents with an AGI up to $241,920. The credit can be applied to all reasonable and necessary adoption expenses, including legal fees, agency fees, court costs and travel expenses. The credit can be taken even if the adoption was not successful.

The bad news is the credit can only be claimed after the adoption is finalized, which means you could wait more than a year for the reimbursement. However, when it is received it can be immediately applied to any adoption loan, which can reduce your costs.

Grants and Interest Free Loans

There are a number of organizations that award financial grants or interest free loans for adoption based on eligibility. Some grants are awarded based on financial eligibility (i.e. applicants experiencing financial hardship), while other grants require a religious affiliation (i.e. Christian or Jewish groups). Although grants and interest free loans can help to defray adoption costs, they cover just a fraction of the total costs. Grants are typically available for lower amounts between $1,000 and $5,000. Interest free loans are available up to $8,000. Your adoption agency can refer you to organizations it thinks you can qualify for.

Adoption Financing With Personal Loans

Many prospective parents may be able to cover a portion of their adoption expenses through savings and other sources, but, with costs as high as $40,000, there is usually a need for some financing. For people with good to excellent credit, loans for adoption may be the best option. Personal loans are unsecured, so they do not require any collateral. Lenders rely solely on your credit score, credit history and employment history for qualification. Adoption loan terms can range from two to seven years, so the payment can be structured to meet any budget.

Top lenders such as SoFi and LightStream currently offer adoption loans of up to $100,000 with personal loan rates as low as 6.26% and 5.74%* with AutoPay, respectively. You will need a good or excellent credit score to apply with either of these lenders. If your credit score doesn’t measure up, there are other lenders who offer adoption loans with slightly higher interest rates for credit scores as low as 580. Upstart currently offers loans up to $50,000 with APRs ranging from 8.69% to 29.99% and Avant currently offers loans up to $35,000 with an APR range of 9.95% to 35.99%. However, with all of these lenders, you can apply online and receive a quick response during business hours. Funds are deposited directly into your checking account within days.

The advantage of a personal loan is it comes with a fixed rate and payment, which helps to create a predictable budget. With flexible adoption loan terms, you can find a payment level that fits within your budget. For example, if you need to borrow $15,000 and you qualify for a 7.99% APR, your monthly payment for a three-year term loan would be $470. If you need a more manageable payment, you could extend the term to five years and reduce the payment to $304. You will pay more interest expenses over the life of the adoption loan, but you’ll have more money each month to take care of your new child.