Access the funds you need to give your dearly departed loved one the farewell they would have wanted.
The death of a much-loved family member or friend can be an incredibly difficult time. While the emotional impact of your loss will no doubt be at the front of your mind, the unfortunate reality is that a person’s death can also place a significant financial burden on those left behind. Funerals can cost as much as $15,000 to organise, which can place a significant strain on your bank balance at a time when you’ve got much more important things on your mind.
However, to help you cover the cost of giving your loved one a proper farewell, you may want to consider a funeral loan.
Expenses to plan for
Many people underestimate or simply don’t even think about just how much funerals cost. In Australia, the total cost of a funeral can range anywhere from $4,000 to $15,000, depending on whether you want a simple ceremony or a much more elaborate farewell.
Why do funerals cost so much? There are several expenses you need to budget for:
- Funeral director fees for their professional services planning the funeral
- Transport for the deceased to a funeral home
- A hearse to transport the coffin to the burial site or funeral location
- A coffin or casket
- The death certificate and registration of death
- Preparing the body for viewing, burial or cremation
- Cemetery and crematorium fees, including the cost of a burial site
- A headstone
- An urn for cremated remains
- Newspaper notices to advertise the death
- Flowers
- A celebrant or clergy
- Transport for guests to the funeral service
- Order-of-service booklets
- Refreshments for the wake
If you need help covering all these costs so you can give your loved-one a proper send-off, you might need a funeral loan.
What types of loans can you use?
A funeral loan is basically a personal loan, and you can use it to cover unexpected funeral expenses that you would otherwise be unable to afford. There are two types of funeral loans available:
Secured funeral loan. A secured personal loan allows you to borrow an amount ranging from a minimum of $2,000 up to a maximum of $100,000, with the flexibility to pay the money back over a term of up to seven years. You’ll need to offer an asset (or assets) as security for the loan, for example a car or the equity in your home, and there are fixed- and variable-rate options available.
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Unsecured funeral loan. An unsecured personal loan does not require you to offer any assets as collateral before your financing will be approved. This represents an increased risk for the lender and these types of loans tend to attract higher interest rates and fees than secured finance. Loan amounts of up to $50,000 are available, and terms typically range from one to seven years.
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- Application fee: $495 (Based on $10,000)
- Minimum loan amount: $5,000
- Maximum loan amount: $40,000
Things to consider before you apply for a funeral loan
Before applying for a funeral loan, make sure to consider the following factors:
- The risks of borrowing. Taking on any kind of debt always comes with a level of risk attached, so make sure you’re aware of all the risks associated with borrowing money to pay for a funeral. For example, will the asset you offer as security be repossessed if you can’t afford to repay your loan?
- Your repayment amounts. Remember that you will not only have to repay the money you borrow, but also any interest that accrues on top of that amount. Crunch the numbers to find out how much your regular repayment amount will be as well as the total cost to you over the life of the loan before you apply.
- Other payment options. Before you borrow money, consider whether there are any other ways you can cover the funeral costs. For example, have you been setting money aside in a savings or term deposit account that could be used to foot the bill?
- The importance of planning ahead. If you’re worried that your death could place a significant financial burden on your family, there are several options you can consider to help pay for funeral costs. These include pre-paid funeral plans, funeral bonds and funeral insurance.
How to compare funeral loans
If you’re shopping around to find the right personal loan to help cover the cost of a funeral, remember to consider the following factors when weighing up the pros and cons of loans:
- Secured or unsecured. Will you need to offer any assets as security for the loan? While a secured loan will allow you to access better interest rates and lower fees, don’t forget that if you fall behind on repayments then the lender could seize those assets.
- Interest rate. Compare interest rates across a variety of loans to work out how much your regular repayment amounts will be. Remember that there are fixed- and variable-rate loans available, so make sure you compare apples with apples.
- Fees. Fees are the other main cost you need to consider when taking out a personal loan. Read the loan terms and conditions for details of any application fees and ongoing charges that apply as well as the penalty charged if you miss a repayment.
- Repayment schedule. Take a closer look at the loan repayment schedule – can you tailor it to suit your income and budget? Is the regular repayment amount something you can realistically afford?
- Loan terms. How long will you have to repay the money you borrow? Short-term loans cost less but require large regular repayments, while loans with longer terms have more affordable repayment amounts but could end up costing more in the long run.
- Speed of access to funds. You may need urgent access to funds in order to pay funeral costs as soon as possible, so make sure to consider the speed with which a lender assesses applications and transfers the loan amount to you.
What you will need to apply
You’ll need to check that you’re eligible for a funeral loan before you apply. You will typically need to meet the following criteria:
- Be at least 18 years of age
- Be an Australian citizen or permanent resident
You’ll also need to provide the following information when you apply for a loan:
- Your name, date of birth, contact details and proof of ID
- Details of the loan amount and purpose
- Information about your employment and income
- Details of your assets and liabilities
Once you have submitted your application, the lender will assess it. Application times vary across lenders, but some are able to offer same-day financing if you need the funds urgently.
Frequently asked questions about funeral loans
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