Adoption Loans and 4 Other Financing Options

Adopting a child is one way to grow your family, but the process can be expensive. According to Family Equality, the average cost of adoption can range dramatically depending on the route you pursue, from less than $2,600 through the public child welfare system (or even no cost) to as much as $70,000 through an intercountry program.

These costs can prove prohibitive, but adoption loans and other financing options can make this goal more attainable.

Compare adoption loans

Adoption loans can come in multiple forms. In many cases, adoption loans are unsecured personal loans from traditional banks, credit unions, or online lenders. These are installment loans, meaning you receive a lump sum and then repay it, with interest, on a set schedule through fixed monthly payments.

How do adoption loans work?

Personal loans usually have fixed interest rates, meaning the payments are predictable. The annual percentage rate (APR) — which includes the interest rate and any upfront fees — is based on your credit profile, income, and debt-to-income ratio (DTI). In February 2024, the average APR on a 24-month personal loan was 12.49%, according to the Federal Reserve.

Loan amounts can range from under $1,000 to $200,000, depending on the lender — though to be eligible, you’ll need to show the lender you have sufficient income to make payments, as well as meet its other requirements. Repayment terms typically extend from one to seven years, though some lenders may offer longer terms for larger loans.

If you use home equity to fund an adoption, you may have access to an even larger loan amount, depending on your home's equity, and even lower interest rates. Repayment terms on home equity-based loans, including home equity lines of credit (HELOCs) may extend to 30 years, depending on the lender and type of loan. Note that lenders will not typically approve a home equity loan if you already owe more than 80% of your home's current value.

Learn More: Annual Percentage Rate (APR) vs. Interest Rate

How to get an adoption loan

Personal loans are relatively easy to get compared to other loan types; funds can be available within days. If you’re considering a personal loan for adoption, here’s a step-by-step guide to getting one. (Though these steps roughly apply to getting a home equity loan as well.) 

1. Assess your finances: Your finances and credit profile are the most important factors a lender will consider when deciding whether to approve you for a loan and when determining your APR. Check your credit report for errors to ensure nothing is dragging your score down. If you find any, report them immediately to the credit bureaus. Additionally, look at your DTI (the percentage of your gross monthly income that goes toward debt payments) to see whether you have room in your budget for an additional monthly payment. Lenders typically prefer a DTI under 35%, though this can vary.
2. Consider your preferred adoption method: The cost of adoption can vary significantly depending on the route you choose. Adoption through the public child welfare system, for instance, can cost significantly less than an adoption through a private agency. Deciding on the type of adoption you’d like to pursue can help determine how much you’ll need to borrow.
3. Shop around for loans: Once you’ve considered your financial situation and how much you need to borrow, start comparing lenders. Narrow down your list by looking at eligibility requirements, and consider each lender’s available loan amounts, repayment terms, fees, and annual percentage rates.
4. Get prequalified: Many personal loan lenders allow you to prequalify to see the possible amounts, rates, and terms you could be eligible for. To do so, fill out a quick questionnaire on the lender’s site or a personal loan marketplace and give permission for it to conduct a soft credit inquiry, which won’t hurt your score. Prequalification isn’t an offer of credit, so it’s no guarantee your application will be ultimately approved, and your final rate may differ. But it can help you get an idea of the options different lenders may offer.
5. Complete your loan application: Once you decide on a lender, complete the application. You’ll have to consent to a hard credit inquiry, which will ding your score temporarily, as well as provide information about your employment, income, and more. If your application is approved and you sign the loan agreement, you’ll receive your loan funds.

Learn More: How To Get Approved for a Personal Loan

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Adoption loans for bad credit

Your eligibility for a loan is based largely on your credit profile, among other financial factors. A bad credit score doesn’t necessarily mean you’re ineligible for a loan, however.

There are several personal loan lenders, especially online, that offer loans for bad credit. These lenders often more heavily weigh other factors to gauge whether you’ll repay the loan, such as your assets or income.

But bad-credit loans are not without downsides. First, you may be limited in the amount you can borrow. For example, lenders that offer loans up to $100,000 may be less inclined to offer that amount to someone with poor credit. Additionally, because your APR is based largely on your credit score, a lower score is likely to result in a high rate.

It’s up to you to consider these downsides as they relate to your situation. If you are concerned about high rates and qualifying for an appropriate amount, you may decide to postpone your adoption journey until you can improve your credit enough to qualify for a loan with more favorable terms.

Interest-free adoption loans

There are a variety of interest-free loans specifically for adoption. However, eligibility for these loans may be limited. They’re often offered by religious organizations and are only available to families that meet certain eligibility requirements, such as religious affiliation and family structure.

Some sources of interest-free adoption loans include:

• ABBA Fund
• Lifesong
• A Child Waits Foundation
• Pathways for Little Feet
   

Learn More:

• How To Get a Low-Interest Loan
• Best Low-Interest Personal Loans

Adoption grants

A loan isn’t your only option to fund adoption. Adoption grants are also available to help families overcome the cost. The key benefit to grants is that the funds don’t have to be repaid. More of your money can stay in your pocket, helping support your growing family.

Different grant programs may help fund different types of adoptions or the various costs associated with the process. Some available resources that provide grants include:

• A Child Waits Foundation (also provides loans)
• Gift of Adoption Fund
• Help Us Adopt
• National Adoption Foundation

As you’re financially preparing to adopt, remember that you can use funds from various sources together. For example, you may receive some grant money and then use a personal loan to finance the costs not covered by grants.

Home equity financing

The structure of home equity financing depends on whether you have a loan or a line of credit. A home equity loan is structured similarly to a personal loan, with a lump sum amount, a fixed interest rate, and fixed monthly payments.

A HELOC, on the other hand, generally has a variable interest rate and allows you to pull out money as needed during the draw period.

Another option for home equity financing is a cash-out refinance. Instead of taking out an additional loan on top of your existing mortgage, a cash-out refinance replaces your current mortgage with a larger one and allows you to pull out the difference in cash.

Similar to your mortgage, home equity financing gives your lender the right to foreclose on your home if you can’t or don’t repay the loan.
 

Learn More: HELOC vs Personal Loan

Adoption crowdfunding

If you have a large personal network, and/or a powerful story, you may find success using crowdfunding for adoption. Crowdfunding involves asking other parties for money to help you reach your goal. You can set up crowdfunding efforts on Adopt Together and ABBA Fund, as well as GoFundMe and similar websites to enlist friends, family, and even strangers to contribute to your adoption goal.

Crowdfunding, like grants, doesn’t require that you repay the funds. However, there may be fees associated with the crowdfunding platform you choose.

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Adoption tax credit

The federal government offers a tax credit, subject to income limits, to help cover qualified adoption expenses. The credit is adjusted each year and is $16,810 as of 2024. The credit applies to qualified adoption expenses, which include:

• Reasonable and necessary adoption fees
• Court and attorney costs
• Travel expenses, including meals and lodging
• Other expenses directly related to a legal adoption

The adoption tax credit is nonrefundable, meaning you can’t claim more than your total tax liability for the year. For example, if you only have a tax liability of $10,000 for the year, your potential tax credit is limited to $10,000. Any remaining amount can be carried forward up to five years, however.

Exclusion for employer-provided benefits

Adoption assistance of up to $16,810 provided by your employer can be excluded from your taxable income. You can exclude the full amount and still take advantage of the maximum adoption tax credit, as long as it covers additional unreimbursed expenses. In other words, you can't use the same expenses to claim the tax credit that were covered by your employer and excluded from income.

Adoption loans FAQ

Do you have to pay for adoption?

In most cases, you’ll have to pay to adopt a child. You may be able to adopt for little to no cost through your state’s foster care system. However, if you adopt through a private agency or independent adoption, you can expect to pay much more.

Can you get a loan for adoption?

You can get loans to pay for adoption through several sources. Some types of loans that can be used for adoption include personal loans, interest-free adoption loans, home equity financing, and more.

Learn More: Types of Personal Loans

How to pay for adoption

There are many options available to help you pay for adoption. First, you may be eligible for grants, which are available from various organizations and don’t have to be repaid. Similarly, crowdfunding allows you to raise money from other individuals to pay for your adoption. Finally, if you aren’t able to raise enough money from other sources, you can use loans to help fill the financial gap.

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