You might be able to get a personal loan approved while on maternity leave to help you survive the unpaid time off.
But that does not always mean you should borrow the money!
Parents with good credit could have trouble repaying the lender if they lose their jobs if FMLA does not apply or runs out after twelve weeks. A mom or baby could have health problems, leading to unpaid medical bills.
Parents with bad credit could have trouble repaying the lender because the combination of lost income and extra expenses deepens their financial problems. They might do better with several alternatives.
Loans for Good Credit
Getting a personal loan during maternity leave is much easier when you have a good credit history (FICO® or Vantage® score of 670 or higher). However, you may want to verify FMLA eligibility and validate your pregnancy delivery costs before hitting the submit button.
FMLA Eligibility
It is more sensible to get a personal loan during maternity leave if the Family Medical Leave Act (FMLA) safeguards your job while you are at home bonding with your baby.
Lenders may want to verify your income and employment when underwriting your loan and may contact your employer, where the FMLA comes into play.
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FMLA covers only 56% of workers nationwide, providing twelve weeks of legal job and healthcare protections for eligible parents working for covered employers.
- Eligible Employees
- 12 months of tenure with the company or agency
- 1,250 hours worked over the preceding 12 months
- Covered Employers
- All public (government) agencies and departments
- All public and private primary and secondary schools
- Companies with 50+ employees working within a 75-mile radius
Be careful about borrowing money when FMLA does not guarantee your return to work. If you lose your job, repaying the loan on time and according to the terms might prove impossible.
Pregnancy Delivery
You can get a personal loan during maternity leave after a complicated pregnancy or delivery. Still, taking on additional debt while bonding with your newborn at home may not be a good idea.
Unpaid medical bills cannot appear on your consumer report until twelve months after incurring the charges. In other words, the lender will never know that you suffered massive debt with childbirth.
- Unreimbursed medical expenses for mom’s hospitalization
- Deductible
- Coinsurance
- Copayments
- Additional NICU charges for premature infants
Please be careful about borrowing money before your health insurance processes claims for your pregnancy and delivery. If your unreimbursed medical expenses bust your budget, repaying the loan on time and according to terms might prove impossible.
Loans for Bad Credit
Getting a personal loan while on maternity leave will be more challenging if you have a bad credit history appearing on your consumer report (FICO® or Vantage® score below 630).
You might consider alternatives besides factoring in FMLA eligibility and unreimbursed pregnancy and delivery costs.
Government Assistance
Many parents who cannot get a personal loan while on maternity leave due to bad credit are often eligible for other government programs. Low incomes correlate with adverse payment history on consumer reports.
Maternity leave financial support is hit or miss based on where you work. For instance, some states have Short-Term Disability or Paid Family Leave. However, several nationwide programs reduce pertinent costs for low-income families.
- Temporary Assistance for Needy Families (TANF)
- Women Infants & Children (WIC)
- Low Income Home Energy Assistance Program (LIHEAP)
- Childcare Assistance Programs
Medical Loans
Parents who cannot get a personal loan during maternity leave due to an adverse history on their consumer report can utilize their Flexible Spending Account (FSA) without a credit check to unlock excellent benefits.
Given the IRS’s little-known rules, medical financing with no credit check via your FSA is feasible. Plus, your pre-tax payroll contributions reduce your exposure to three possible levies.
- Federal income taxes
- State income taxes
- FICA payroll taxes
First, your employer must immediately reimburse any qualifying expense up to the annual contribution election. You have up to 52 weeks to repay the amount advanced using pre-tax payroll contributions.
- While on leave of absence from work
- Even if the account balance is lower
Second, your employer must allow all employees to participate in the FSA without pulling their consumer report or checking their credit score, allowing them to borrow up to the annual contribution limit.
Your unreimbursed pregnancy and delivery expenses qualify for this interest-free, FSA-enabled loan for adverse payment history with no credit check.
Buy-Now-Pay-Later
Parents who cannot get a personal loan during maternity leave due to a bad credit history on their consumer report have another option. They can use buy-now-pay-later schemes if they need to purchase baby cribs and other furniture for their newborn.
Buy Now Pay Later baby furniture allows you to purchase cribs, cradles, changing tables, and rocking chairs with monthly installments. Third-party finance companies often approve consumers without a traditional credit check.
Of course, new parents facing unpaid time off from work and extra medical expenses should avoid borrowing money at all costs. Remember the second-hand market if you need furniture for your baby. Infants quickly outgrow cribs, leading to unwanted clutter.
Retirement Accounts
Parents who cannot get a personal loan during maternity leave due to an adverse history on their consumer report can take money from a qualifying retirement plan without a credit check.
- 401(K)
- 403(B)
- 457(B)
IRS rules allow qualifying retirement plans to disburse funds under limited circumstances. Consult your plan document and summary description to see how they handle three options.
- Hardship distributions for an immediate and heavy financial need
- Early withdrawals before age 65 are subject to a 10% surcharge
- Loans that do not incur taxes if you follow the repayment schedule
