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.
Personal loans to consider for covering adoption costs
How do baby and adoption loans actually work?
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.
How much does adoption cost?
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.
How can I pay for an adoption?
There are several different ways you can fund your baby and adoption. These include:
Some charitable organizations offer loans with no interest, specifically designed to help adopting families.
These types of loans can also be a bit slower than other types of financing, taking between one and three months to apply for and receive. On top of this, you may have to pay a small monthly fee during repayment, so ensure this cost is less than any low-interest rate loans you could qualify for.
Some personal loan providers and charitable foundations also offer adoption loans with lower interest rates than you might find when applying for an ordinary personal loan. You can typically borrow more than you would with an interest-free adoption loan and could even potentially get enough funds to cover the whole adoption process.
Many financial institutions, including banks and credit unions, as well as online lenders, offer unsecured personal loans. This means you don’t have to offer up any collateral, like your home equity or car, in order to secure the loan. To qualify, you usually need a good or excellent credit rating of 650 or higher. In addition, you will need to provide details of your income.
Online peer-to-peer lending platforms connect borrowers with investors who can fund your loan. Your credit rating plays an important role in finding an investor and it also helps determine the interest rate you will be charged.
Get a lower interest rate on a personal loan by securing it with your home equity. You’ll typically be able to borrow up to 80% of the amount of equity you own in your home. Keep in mind that you could lose your house if you can’t pay your loan back.
Some organizations offer grants to people who wish to adopt children. You generally won’t be able to fund the entire adoption with a grant, but they can help you cover some of the major costs and lower the overall price of the adoption.
Many adoption agencies don’t ask for upfront payments, instead they divide it into three smaller payments. Typically, you’ll pay a third after submitting your application, another third after finishing the home study and the final third at the start of post placement supervision. While you might still need to get financing to pay off these costs, it’ll be a much more manageable amount and allow you time to save in between your payments.
You can offset some of the costs involved in adoption through tax credits. As of August 2018, according to the Government of Canada’s official website, you can claim the following:
As a parent, you can claim an amount for eligible adoption expenses related to the adoption of a child who is under 18 years of age. The maximum claimfor each child is $15,670. You can only claim these incurred expenses in the tax year that includes the end of the adoption period for the child.
Some employers offer adoption benefits to their employees. These can come in the form of adoption information, referral services, post-adoption counselling and paid or unpaid leave.
Tap into your social network by starting a crowdfunding campaign to pay for your adoption. You can either use social media platforms specific to adoption or go with a site that has wider name recognition like Kickstarter or GoFundMe. Be sure to invest time on the video and regularly post on social media to get the widest reach.
If you have funds coming within the next month but need to pay now, you might consider charging the expenses to your credit card for the time being. If you take this route, consider applying for a new card with a low interest rate. That way, if you don’t make your repayment at the end of the month in full, you can minimize the amount of interest you’re charged. Otherwise, credit cards can be one of the more expensive options, since they tend to have higher interest rates than loans.
How can I get a competitive adoption loan?
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 loan requirements
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.
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.
5 ways to keep adoption costs down
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.
When is getting a loan for adoption a good idea?
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.
What’s the best time to apply for an adoption loan?
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.
Things to avoid
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.
Frequently asked questions
Adoption agencies usually offer payment plans to adoptive parents. For example, you may be able to pay one-third of the fees when you apply, one-third when the home study process is complete and the remainder upon the child’s placement.
Yes. As of August 2018, from the Government of Canada’s official website, on Line 313 of your tax return you can claim the following:
As a parent, you can claim an amount for eligible adoption expenses related to the adoption of a child who is under 18 years of age. The maximum claim for each child is $15,670. You can only claim these incurred expenses in the tax year that includes the end of the adoption period for the child.
A personal loan can be used to cover any legitimate expenses during unpaid maternity leave. Before taking out a loan, you may want to look into other ways to cover your expenses, such as seeking government assistance.
Aliyyah Camp is a publisher helping folks compare personal, student, car and business loans. Prior to joining Finder, she ran her own personal finance blog and wrote for numerous finance sites. Aliyyah earned a BA in communication from the University of Pennsylvania. She regularly attends industry conferences to stay in the know about market changes that can affect consumers. When she's not helping people with their personal finances, you can find her at the movies or going for a run outdoors.
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