Revision as of 22:15, 2 July 2015

Loans are one way to pay for some or all adoption costs. Some organizations offer low-interest adoption loans to qualifying families. You can also talk to your bank about home equity or line of credit loans, although they are usually at a higher interest rate than that offered for adoption-specific loans. While loans do require repayment, there are resources that can help you with that once your adoption is finalized, such as the Adoption Tax Credit.

Borrowing From Yourself

Before you take a loan out from someone else, consider borrowing from yourself. Many company 401k plans allow employees to borrow up to 50 percent of their current 401k balance. The big advantage of this is that you are paying yourself interest. The downside is that if you change companies, you will be expected to pay off the loan or take the 10 percent tax penalty on the loan amount as an early withdrawal.

Credit Cards

Some agencies will encourage you to take out a new low-interest credit card to pay adoption related bills. Then you can supposedly pay off the credit card with your tax credit before the rate goes up. However, given the potentially long timeline of an international adoption, you may end up paying higher interest long before the tax credit comes back.

Home Equity Loan

Another alternative to consider is a home equity loan. These are typically low interest loans that come with a check book you can use to write checks to pay your bills. The biggest advantage here is that interest from a home equity loan may be tax deductible. However, some financial advisers recommend using credit cards instead of home equity loans since credit cards are unsecured debt. If you get in trouble paying off a home equity loan, you could lose your house.

Adoption Loans

Adoption loans come in several variations, but usually share a similar purpose: helping adoptive parents manage the cashflow difficulties commonly encountered during their adoption process.

A few of the most common types of adoption loans found in the organizations below are perpetual funds, adoption lenders, and specialized bank loans.

Perpetual funds can offer an "honor system"-based loan, usually free of interest, in which a borrower is expected to pay back the loan by a set date. These funds are usually initiated through charitable donation, but can essentially come from anywhere. They are limited to a set number of people they can help due to the no-interest nature of the perpetual fund system, but if they are associated with an organization, such as a church, they can thrive off of regular donations from the members of that organization.

Adoption lenders are groups specifically dedicated to providing adoption-specific loans. Some of these groups are peer-to-peer lending systems, where an applicant posts their need for a loan on an online board, and people with money to invest can look at the listing and fill a portion of the loan. They can have high interest rates if a borrower has a poor credit history, but if managed carefully can actually become powerful tools for managing a family's finances by getting money for immediate expenses at the necessary times. It's important to note, however, that not all lending groups are equally trustworthy. It is wise to consult with a financial expert or other trusted company before engaging in an adoption loan of any kind.

Many larger banks offer specialized loans for Adoptive Parents that may have special features designed to accommodate the needs of the adoption process. Bank of America, for example, offers unsecured adoption loans that are meant especially for adoptive parents to cover their financial needs.

The following organizations offer adoption-specific loans:

• America's Christian Credit Union
• Hebrew Free Loan Association
• National Adoption Foundation
• Prosper.com

Source

Strickert, Mary. Guide to International Adoption Originally published by Adoption Media, LLC.