5 Tips When Taking Out a Personal Loan for Divorce Expenses

Ending a marriage marks an intensely painful crossroads. Between attorney fees, supporting separate households, dividing up assets, and more, the costs add up quickly. Savings or help from family and friends often fall short. Taking out a personal loan offers a lifeline to handle the financial load in the near term.

This guide covers key considerations around using a personal loan for divorce expenses.

Understanding the Cost of Divorce

Going through a divorce can make life feel like it’s been turned upside down. Not only is it emotionally draining, but the financial costs can also pile up unexpectedly and feel totally overwhelming. Most couples underestimate how expensive the divorce process will be.

Though costs depend a lot on each couple’s unique situation, the average divorce in the U.S. costs around $15,000 in attorney fees, court costs, professional services, new living expenses, and more.

Some of the common expenses that come up during divorce include:

• Legal fees – These usually make up the bulk of costs, especially if disputes drag on. Hourly attorney rates often range from $200-$500.
• Filing fees – Courts charge to officially file divorce paperwork and process requests.
• Appraisal and professional service fees – Paying appraisers to value real estate, businesses, and personal property is often needed. Forensic accountants are brought in for complex asset situations, too.
• Establishing separate households – Rent, utilities, furniture, and more have to be paid when spouses move out and live on their own.
• Health expenses – Extreme stress takes a toll both mentally and physically, leading to more medical visits.

Additionally, the long-term financial impact of divorce can’t be ignored either. Losing access to a spouse’s job benefits, retirement accounts taking a hit, receiving tax penalties from withdrawing assets too soon: these all have lasting effects.

Key Takeaway: Divorce almost always costs more than people expect due to all the direct expenses and difficult long-term financial consequences. Saving diligently beforehand helps relieve the economic burden.

Knowing When to Consider a Personal Loan

When divorce expenses exceed personal savings and assistance from family, taking out a personal loan is one option to cover the remaining costs. These loans allow you to borrow money that has to be repaid with interest over a set repayment term. Loans give you access to money fast when your personal savings fail to cover the mounting piles of bills. They serve as a financial bridge until the dust settles.

Taking on lending as part of the divorce process definitely has some potential upsides:

• Pulling cash without raiding your rainy day funds or retirement accounts keeps your safety nets intact.
• As asset division negotiations drag on, loans provide money to pay pressing bills rather than putting expenses on high-interest credit cards.
• Securing your own place to stay and paying legal fees upfront gives you stability during an emotionally chaotic period.

At the same time, relying on borrowing does come with serious risks to think over:

• More monthly obligations stretch already tight budgets even further.
• Folks barely keeping up with existing debts might quickly feel swamped by another payment drag.
• Bad credit or low income could shut the lending door completely when you need it most.

Key Takeaway: Generally, loans make most sense for those on solid financial footing overall minus the divorce crisis. Leveraging lending taps funds now without sabotaging your 401k’s future growth or tying up home equity.

Choosing the Right Lender

Lots of banks, credit unions and online lending companies offer personal loans, but comparing options is crucial before choosing where to apply. You want to look for lenders that offer the best terms and reputability to fit your financial situation during the divorce process.

Some top priorities when researching lenders:

• Established national banks and highly-rated lending sites
• Easy ways to view rates without a hard credit check
• Competitive interest rates based on personal factors
• Flexible loan amount and repayment term options
• Quick and simple application procedure

Top picks are often large traditional banks like Chase, Bank of America, or Wells Fargo for their reliability and competitive rates. Meanwhile, sites like LendingClub allow you to preview loan details upfront. Local credit unions can provide great rates through community-focused lending programs as well.

Key Takeaway: Whichever route you choose, avoid super high-interest lenders that seem predatory in nature despite the convenience. Do your homework to determine the most recommended sources with a history of servicing borrowers fairly.

Applying for the Loan Effectively

Submitting a carefully prepared and truthful application gives you the best shot at both getting approved as well as setting realistic repayment expectations.

Here are some tips when applying for a personal loan:

• Review your credit reports and latest credit scores so you understand how lenders view your history. Dispute any errors that could impact your application.
• Estimate the total loan amount required. Account for all attorney fees, housing expenses, and other costs that need to be covered.
• Gather necessary paperwork like recent tax returns, pay stubs, IDs, and account statements about assets/debts.
• Submit online applications to your selected lenders after comparing interest rates and fees.
• Read all policies, disclosures, and terms extremely closely before signing off.
• Wait patiently during approval processing, which usually takes 1-7 business days to complete.

Also, prepare to answer detailed questions from lenders about your employment, income, current debts, assets, credit background, and intended loan purpose. Giving candid and accurate information bolsters your changes much more than exaggerating details to make you seem like a better applicant.

Key Takeaway: Allow plenty of time to gather paperwork, research lenders completely, and thoughtfully fill out application questions. This gives you the best shot at approval.

Managing Loan Repayment

Personal loans make getting through divorce possible financially when tension runs high. However, borrowers must prioritize paying back the money owed on time and consistently. Don’t let the relief today create major issues down the road.

Here are some tactics to simplify loan repayment:

• Treat monthly payments like any household bill. Add it as a line item in your budget.
• Enable autopay through your checking account for on-time payments.
• Pay online if possible since companies send reminders and notices.
• Put payment due dates into your calendar app so they don’t sneak up on you.
• Make additional principal payments when possible to pay loans off quicker.
• Communicate proactively with lenders if a struggle emerges to realign terms.

Key Takeaway: Divorce makes life seem turbulent enough without piling on financial headaches, too. But quick relief solutions like personal lending lead to consequences when used irresponsibly long-term. Establish repayment as an essential monthly priority to prevent credit score damage that could take years to undo.

Final Thoughts

There’s no sugarcoating the pain of unraveling a marriage. The flood of legal, housing, and childcare expenses only heightens the stress. Personal lending opens the emergency money flow so you can keep fighting for the future.

Take time to pick reputable lenders with fair rates tailored to your situation. Then, carefully document income and assets when applying. With approval in hand, rigorously budget payments each month, leveraging technology like autopay and calendars to guarantee meeting your obligation.

As a customer-oriented online lender, Level offers personal loans with some of the lowest interest rates available to support families during tough transitions. Start your journey toward financial stability by applying for a personal loan with Level today.