If you’re planning to adopt and need to borrow money to cover the costs, read this guide to find out what your financing options are.
It’s an exciting time when you decide to add a member to your family, as a couple or an individual. However, both baby and adoption costs can quickly add up throughout the long process. Aside from taking out a loan to help you cover the costs, you can also look into grants and tax credits. These are designed to give you access to funds for your growing family when you need them.
Read our guide to discover how you can fund your adoption costs.
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- Max. loan amount: $35,000
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Most baby and adoption loans are generally unsecured, meaning you don’t have to provide any kind of collateral – like your house or car – as security. Depending on your financial situation, you can usually borrow up to $35,000 through an unsecured personal adoption loan, however this will fluctuate greatly based on personal factors. The maximum you qualify for depends on factors such as the lender you choose, your credit score, your income, your ability to make loan repayments and the adoption details.
The process for adopting in Canada is constantly changing every year, so the cost and adoption process may differ. Between provinces and territories, adoption laws and regulations also vary.
The cost of an adoption will depend on the child you are adopting. If you adopt a child through the public system, there is usually no fee or minimal fees. Private adoptions, on the other hand, range from $10,000 to $25,000 for a child born in Canada and between $25,000 to $50,000 for a child born overseas.
There are several different ways you can fund your baby and adoption. These include:
The best way to get a competitive loan is to compare a variety of different lenders. Consider your current financial situation and how much you need to borrow before starting your research, so you know which factors to prioritize. Factors you might want to look at include:
- Interest rate. If you’re concerned about your overall loan cost, you might want to look into interest-free adoption loans before moving on to low-interest providers. That’s because interest is often the largest contributing factor to your loan’s cost – although sometimes fees come into play.
- Fees. Fees your lender may charge include application or administration fees, loan disbursement fees, early repayment fees and late payment fees. Some interest-free adoption loans also come with monthly fees.
- APR. Your loan’s annual percentage interest rate (APR) is an expression of its interest and fees as a percentage. It’s the easiest way to compare the cost of different loans – as long as they have the same term length.
- Eligibility criteria. In most circumstances, you will likely need to have a credit score of 650 or higher to qualify for a personal loan. Some lenders cater to those with bad credit scores, however you won’t secure the lowest rates.
- Turnaround time. The loan processing time can vary depending on which option you choose. If you apply for a personal loan or a peer-to-peer loan, you can usually receive the approved funds within one or two business days. When it comes to grants and subsidies, the process takes a lot longer.
- Loan term. Your loan term is the amount of time you have to repay your loan. A longer term gives you lower monthly repayments, but you’ll pay more in interest. Short loan terms translate into higher monthly repayments but an overall savings on interest, making the loan cheaper. Factor in the amount you can afford to pay back each month and select your loan term based on the result.
Adoption-specific loans tend to have more, adoption-specific requirements than your standard personal loan. The eligibility requirements will depend on what type of loan you take out, however in general, you can expect to meet the following requirements to qualify:
- Good credit. While not always necessary – there are bad credit financing options – you’ll need to have at least good credit to get the lowest rates. This usually means a score of 650 or higher.
- Income. You’ll need to make a high enough salary to prove to your lender that you’ll be able to afford your loan repayments.
- Low debt-to-income ratio (DTI). Some lenders also compare your monthly income to your debt obligations when determining whether or not you can afford a loan. Aim to have a DTI of 43% or lower.
- Canadian citizen or permanent resident. Most lenders require borrowers to either be a Canadian citizen or be a permanent resident and have a valid Canadian address.
- Age of majority. You’ll need to be 18 years old, or the age of majority in your province or territory.
Once you’ve decided how you will fund your adoption, you might be thinking: how else can I save money? Adopting a child may be expensive, but you can lower the cost or make it more manageable by:
- Applying for a tax credit. The government offer tax credits that can be used to offset the cost of adoption. It won’t save you money up front, but it can mean paying less or even receiving money back when filing your taxes.
- Building your credit. The better your credit score, the lower your interest rates will be when you apply for a loan. While you’re working on saving for your adoption, see if you can improve your credit score to increase your chances of scoring a more competitive interest rate.
- Seeing if your employer offers benefits. Some employers may offer assistance when it comes to adding a new member to your family. Whether this is a reimbursement or a lump sum that helps to cover the costs, looking into an adoption program sponsored by your employer could easily cut your adoption costs.
- Finding a grant. Grants really are free money. You don’t have to pay them back, and there are grants out there specifically for families looking to adopt. Take your time to research and apply for as many as you can qualify for. After all, every little bit can help.
- Adjusting your budget. This won’t necessarily keep adoption costs down, but it will help maintain your budget. If you can cut out things you don’t need, like changing that Netflix subscription into a library card, you can put that extra money towards your adoption fund.
You might want to apply for an adoption loan if:
- You’ve applied for grants and still need financing. After applying for as many grants as possible, reassess your financial situation, and, if you find you still need additional funds, consider applying for a loan.
- You don’t have enough time to save up. Adoption can be a long and drawn-out process. Instead of getting funds to pay for all of your adoption costs at once, you might want to consider getting financing for your immediate needs and opening a high-interest savings account for future costs.
- You have funds coming in but you need money now. Grants can take a while to process, and tax credits aren’t available year-round. Look for a loan that doesn’t come with early repayment fees so you can have the cash you need now and pay it back as soon as your money comes in.
This largely depends on what you want to finance. If you need money to pay for upfront fees at an adoption agency, you might want to consider applying for an online loan two weeks before your first payment is due to receive your funds on time.
Many adoption-specific loans and grants require you to be at a certain stage in the adoption process before you can qualify. Contact a lender to find out more specific details.
When comparing your loan options, keep the following in mind:
- Repayments you can’t afford. If you think you might have trouble repaying your loan, avoid taking it out in the first place. Not making repayments on time could impact your ability to borrow money in the future since some lenders will report your late repayments to the credit bureau.
- High rates. Be wary of taking a loan with a very high APR, which increases the overall cost of the loan. Instead, check if you qualify for any grants or tax credits.
- Predatory lenders. Stay away from lenders that try playing to your emotions or promising low rates for bad credit without offering much evidence. There are many disreputable companies out there, especially in the online world.
- Borrowing more than you need. Some lenders will allow you to borrow more than you need. Only borrow exactly what you need since you’ll be paying interest on the amount you borrow. The more you borrow, the more expensive your loan will be.