If you are looking an online funeral loan, Gathered Here will soon be offering 3 months’ interest-free finance through zipMoney. For more information, contact us at email@example.com.
Introduction to Funeral Loans in Australia
When a loved one passes away, the last thing anyone wants to think about is money, yet the reality is that funerals are expensive. In Australia, the average cost of a cremation is $7,420 and the average cost of a burial is $19,000 (including all cemetery fees).
For many, organising this amount of money in a short amount of time can be difficult or may simply not be possible. Even for those who can personally pay for funeral expenses until they are reimbursed by the deceased estate, it can be a significant strain to individual finances. In these circumstances, you might consider a funeral loan to help pay for funeral expenses.
This guide is designed to step you through the different options available when seeking a funeral loan, how to compare products, and the various risks involved.
We cover the following topics:
- Funeral Expenses
- Considerations Before Applying for a Funeral Loan
- Types of Funeral Loans
- How to Compare Funeral Loans
- What You Need to Apply for a Funeral Loan
1. Funeral Expenses
- Professional services fee paid to the funeral director
- Mortuary care
- Transfer of the deceased
- Death certificate
- Cremation fee
- Newspaper notices
- Orders of service and thank you cards
In addition to these funeral expenses, it’s critical to account for the cemetery fees – including both the right of interment (i.e. the burial plot) and the interment fee (i.e. the digging fee) – which make up a significant part of the overall cost.
For more information on funeral expenses, see our Guide to Understanding Funeral Costs in Australia.
2. Consider Before Applying for a Funeral Loan
When you apply for a loan, you are taking on debt. In most cases, this means you will be paying interest on the amount you borrow.
You should carefully consider the following factors before applying for a funeral loan:
- Will you be able to keep up with repayments? When you take out a loan, it’s extremely important to be sure that you will be able to make your repayments on time. Depending on the terms of your loan, failure to keep up with repayments can result in penalty fees, or in the case of a secured loan, can result in the financial institution enforcing a sale of your security (e.g. your house or car) to repay the funeral loan.
- Do you have any other funds available? If you are able to draw down on a savings account or term deposit, this will usually be more cost-effective than taking out a loan.
- Will the funeral loan affect your credit rating? Taking out a loan can impact your credit rating. If you are planning borrowing amounts in the future, such as taking out a mortgage or purchasing a car on finance, applying for a funeral loan may limit your options.
- Can you arrange a cheaper funeral? Funerals don’t have to be expensive. Consider your options for arranging a cheaper funeral that you can afford without finance.
3. Types of Funeral Loans
There are 3 main ways you can borrow money to pay for a funeral:
- Personal Loans
- Payday Loans (or Bad Credit Loans)
- Buy Now, Pay Later Funeral Finance
Each has certain characteristics you should be aware of.
A personal loan is money borrowed from a financial institution for a personal expense, such as a car, holiday, or – in this case – a funeral.
Personal loans typically have the following characteristics:
- For a fixed amount up to $100,000
- Must be repaid over a set term (usually between 1-7 years)
- Require regular repayments (weekly, fortnightly, monthly)
- Can have fixed or variable interest
- Take 3 – 7 days to obtain approval
Personal loans are either secured or unsecured:
- Secured funeral loans require you to pledge an asset as collateral for the loan (such as your house and/or car)
- Unsecured funeral loans don’t require you to pledge an asset as collateral
Generally speaking, you will be able to get a lower interest rate under a secured funeral loan. However, it also means that should you be unable to repay the loan, the bank or financial institution will sell your pledged asset(s) to settle the debt.
Payday Loans (or Bad Credit Funeral Loans)
A payday loan is a high cost, short-term loan that derives its name from getting the borrower through to their next “payday”.
Payday loans typically have the following characteristics:
- Short-term (usually between 16 days to 1 year)
- High rates
- For smaller amounts (usually up to $2,000)
- Often same day approval (even if you have a bad credit score)
Payday loans typically target sub-prime consumers – i.e. individuals who have bad credit scores and who may have difficulty repaying the debt.
While the allure of instant approval without a credit check is appealing, these loans have very high rates. In Australia, the fees and charges on payday lending are capped at a one-off establishment fee of 20% of the amount loaned, and a monthly account keeping fee of 4%.
Further, if you fail to make a repayment, you can expect to be charged expensive default fees. In Australia, a payday lender can charge defaulting consumers up to 200% of the total loan amount (including any repayments and default fees already paid).
Caution: Consumers who turn to payday loans can easily fall into a debt spiral, where they are unable to keep up with repayments and growing default fees. Due to the risk involved with these loans, it should be kept in mind that there are often alternatives to borrowing to pay for a funeral. See our Guide to Funeral Assistance in Australia for more information.
Buy Now, Pay Later Funeral Finance
In more recent years, “buy now, pay later” finance has become available at a growing number of merchants across Australia. Under some of these finance options, the consumer pays no interest which is instead paid by the merchant. Merchants willingly agree to do this as offering buy now, pay later finance increases their overall sales.
Gathered Here has partnered with zipMoney – a buy now, pay later solution – to enable customers to purchase funerals on interest-free finance from participating funeral directors. This funeral loan has the following characteristics:
- Interest-free for 3 months
- Rebate on all fees paid within the first 3 months
- For loan amounts between $1,000 to $30,000
- Instant funeral loan approval
- Apply online through the Gathered Here website
- Only available with participating funeral directors
Important Note: Buy now, pay later finance on Gathered Here is generally only approved for prime, near prime and emerging prime consumers (i.e. consumers who are likely to be able to repay the loan). We do not promote the practice of lending money at high interest rates to those who are unlikely to be able to repay.
4. Comparing Types of Funeral Loans
When it comes to funeral loans, there are dozens of different options available for you to choose from. To help you compare funeral loans, we have set out the key features to be aware of and some comparison calculations below.
The key features that differ between funeral loans are:
- Interest Rate: The higher your interest rate, the higher your repayments. You can also select either a variable or fixed interest rate loan – with fixed rates normally being slightly higher as they offer consumers greater certainty.
- Term: How long do you need to repay the loan? Generally, you should aim to pay off your loan as quickly as practicable so as not to continue paying interest unnecessarily. However, the shorter you make the loan, the higher your repayments – so make sure you plan ahead and are confident that you will be able to meet your loan obligations.
- Establishment or Application Fee: The interest rate isn’t the only cost you should look out for. Also ensure you factor any establishment or application fees into to the total cost of the loan.
- Penalty Fees and Rates: Many funeral loans have penalty fees or penalty rates that will apply in the event that you fail to make a repayment on time. These penalties can be harsh so ensure you read the terms & conditions carefully.
- Speed of Loan Approval: Do you need an emergency or same day funeral loan? Some loans can take over a week to process and approve.
- Online Funeral Loan: If online convenience is important, some payday loans and our buy now, pay later finance option can be applied for and processed entirely online.
- Credit Checks: Do you have a good credit score? Most funeral loans will require you to prove that you are creditworthy and will be able to repay the loan. However, some loans (such as bad credit funeral loans) are available to sub-prime consumers.
Cheapest Funeral Loan
While there a number of features that consumers look for in a loan, the cost of the loan is often a key consideration.
Below we compare how much it would cost to borrow $2,000 for 3 months through a payday loan and our buy now, pay later finance option. (Note: We have not included a comparison with a personal loan, as these loans are not normally taken out for 3 month terms.)
Assuming in both scenarios that repayments are made on time, our buy now, pay later option works out to be completely interest-free and fee-free, whereas the payday loan incurs rates and fees totalling $640 (or 32% of the loan amount).
|Buy Now, Pay Later Finance||Payday Loan*|
|Term||3 months||3 months|
|Total Monthly Fees / Interest||$18||$240|
|Rebate on Fees||-$43||-$0|
|Total to be Repaid||$2,000||$2,640|
(*These calculations are based on the maximum amounts a lender is permitted to charge under law.)
5. What You Need to Apply for a Funeral Loan
To apply for a funeral loan you will need to be over 18 years of age and an Australian citizen or permanent resident.
Depending on the type of loan you are applying for, you will generally need to show a combination of the following:
- Proof of ID
- Proof of income and employment
- Bank statements
- Details of your assets and any liabilities
What are the advantages of a funeral loan?
- A funeral loan can give you the money you need to arrange a fitting funeral for your loved one
- Fast access to money
- Repayment in instalments over time rather than one large lump sum payment
What are the risks of funeral loans?
- You will have to pay interest and fees (in most cases)
- Missing a repayment can result in penalty rates
- Failure to repay on time can damage your credit rating
What are alternatives to funeral loans?
Some alternatives to funeral loans include:
- Funds from the deceased’s estate or superannuation
- Personal savings
- Government Bereavement Allowance
- State funeral assistance
For more information, see our Guide to Funeral Assistance.
Can I repay my funeral loan early?
Whether you can repay early depends on the terms of the particular loan. Some fixed loans, for example, do not allow early repayment or will trigger a termination fee for early repayment.
Can I get an online funeral loan?
Yes, while most personal loans will require you to speak to consultants and submit lengthy documentation, some loans can be sought and approved entirely online.
I need a fast funeral loan – what are my options?
If you need an emergency funeral loan, you have several options:
- If you have a good credit score, you can apply for buy now, pay later funeral finance on our website and get instant approval (in most cases)
- If you have a bad credit score, you may need to look at bad credit funeral loan options – however, as discussed above, you should try to avoid these types of loans if possible
What is the cheapest funeral loan available?
Our buy now, pay later option is interest-free and offers a full rebate on all fees (provided you are able to repay the credit within 3 months).
We hope you have found this guide to funeral loans helpful. If you have any questions about our buy now, pay later funeral finance, please don’t hesitate to get in touch with us at firstname.lastname@example.org.
See the full picture and make fully informed decisions. Move forward in the certainty that your loved one’s memory will be looked after. Funeral Homes are Gathered Here.