Can I borrow money from my social security benefits

can i borrow money from my social security

Although borrowing money from social security benefits may seem like an intriguing idea for all those approaching retirement age, it is no longer possible and was only a result of a loophole in the system. The Social Security Administration updated its policies in 2010 so that borrowing money before the full retirement age without penalty is off the table. 

If you are in a position where you need to borrow money, you might be exploring every single avenue you might have to get some affordable funding. While most funding options charge interest or other fees, borrowers typically try to find the most cost-effective financial products before resorting to high-interest debt.

You may have heard of something resembling a loan using your Social Security benefits that allows you to borrow money interest-free. As recently as February 2023, approximately 66 million American citizens collected social security benefits!1

The Loophole That Permitted Loans Through Social Security

Before 2010, a major loophole in Social Security made it possible for individuals to start collecting benefits at 62 years of age and then repay all the money they collected from the Social Security Administration by the age of 70. After the money was repaid, the Social Security beneficiaries could refile and start receiving payments again as if they had not received any before that point. 

Essentially, this loophole produced an interest-free loan for people of a certain age sourced from their social security income. Unfortunately, that loophole was closed by the Social Security Administration in 2010, making it so no more individuals can obtain an interest-free loan from the government.

The new policies have made it so that if you decide to file for retirement benefits before the age of 70, you only have 12 months after beginning to receive payments to suspend them at a later date. Deciding to suspend them will still require that you repay the SSI benefits in order to maintain the number of payments you are meant to receive upon retirement. 

Current Withdrawal Requirements for Social Security Benefits

The updates to laws regulating Social Security still allow retirees to suspend payments if their financial situation changes, but there is no longer a loophole that allows loans as there used to be. A new job or an inheritance could postpone an individual’s need for Social Security benefits. If you choose to delay your Social Security until you reach the age of 70, you may receive larger payments when the time comes. 

Delayed Retirement Credits

When you delay receiving your Social Security, you are eligible for delayed retirement credits. This increases your monthly benefit, which can be extremely helpful if you are a bit behind on your retirement planning. 

Since the change in the loophole, you will only have 12 months to change your mind and stop receiving benefits to be eligible for delayed credits. You will have to fill out an application to stop the Social Security payments and repay all the benefits you received. 

You can only withdraw your request for benefits once in your lifetime. And if you change your mind about delaying your Social Security, you have 60 days to cancel your application to stop payments. 

Penalties for Early Receipt

The Social Security Administration allows individuals to begin receiving benefits at the age of 62. However, you might be penalized for early payment depending on when your full retirement age (FRA) is. The payment amount is reduced by a certain percentage based on how long before you’ve reached full retirement age you begin receiving benefits.

If your FRA is 66 or 67, your benefits may be reduced anywhere between 25% and 6.7% if you begin receiving payments between 62 and 66. Early receipt of benefits could be worth the penalty, depending on your current financial situation. But for many, the maximum amount of benefits is preferable.

Other Lending Options for Quick Funding

For those in need of funding, there are lending options available that could perfectly match your needs. You may decide that requesting your Social Security benefits early is not the best idea and choose to forego payments so you avoid penalties. Unfortunately, that does not mean you can overlook a financial crisis. You likely still need to find a way of borrowing money.

There are several ways to borrow money when you need to get through this challenging time. Ideally, you would have an emergency fund available to cover unexpected expenses, but not everyone has cash saved. Here are a few options to get the cash you need for a financial emergency:  

Borrow From a Friend or Family Member

A great way to get the money you need without having to pay high-cost interest charges is to simply ask a friend or family member for a loan. Many people try to avoid doing this, which is understandable as mixing personal relationships with finances can be tricky. However, if you do have friends or family who are in a position to provide some help to you in a difficult situation, you may be surprised how willing they are to help. 

Clear communication should always be a priority when you are getting a loan from family or friends. We recommend that you work out a payment plan before borrowing cash so that you can both be on the same page about when and how you will pay back the loan. The key to avoiding tension is to keep communicating through the process in case anything changes for either of you. 

To prevent any awkwardness, you can even insist on paying a small interest rate on the money you borrow. Most financial experts suggest paying a friend or family member an interest rate equal to what they might have accrued if they had put the money in a high-yield savings account – around 1-2%. By doing this, they won’t feel like they are sacrificing anything, and you still save money because an interest rate that low is far better than even the best rates offered on a typical personal loan.

Personal Loans

A personal loan is one of the most versatile lending products available, which can make them a great option for financial emergencies. Personal loans come in all different shapes and sizes from many a variety of lenders. You can get a personal loan from a more traditional lender like a bank or a credit union if you have the credit score to qualify. But it is also possible to obtain a personal loan from an online lender, where you might find a wider range of requirements.

Most personal loans are unsecured loans, which is why they often have higher interest rates than mortgage and auto loans. The credit check in your personal loan application may affect your ability to qualify or raise your interest rates if you have bad credit. You can find personal loan options for borrowers with poor credit, but you will need to be willing to pay higher rates. 

Payday Loans

A payday loan is a short-term loan that is meant to act as an online payday advance on your next paycheck. Payday loans have incredibly high-interest rates and shouldn’t be relied upon except as a last resort. Payday lenders are regulated strictly state-by-state, so if you are considering one, it is essential that you research the laws on payday loans within your particular state. 

It can be easy to fall into a cycle of debt with payday loans, as many of them are so short-term that the borrower is required to pay them back within two weeks. However, we understand that sometimes you have so few options that it is necessary to pay for an expensive loan. The most important thing to remember to do when considering a payday loan is to research your lender thoroughly so you know you can trust them and budget out how you plan to afford the repayment of the loan. 

Can Social Security Income Recipients Get a Loan?

There are plenty of individuals who may already be receiving supplemental security, disability benefits, and/or retirement benefits who are in need of a loan of some kind. While qualification depends on multiple factors, it is possible for SSI recipients to be approved for loans if they can meet eligibility requirements.

Income Verification

The biggest concern when it comes to whether those who receive Social Security benefits can be approved for a personal loan or other type of funding is that their benefits don’t count as income. This could not be further from the truth. Regular income verification is a crucial part of the loan application process, but most lenders do not care where that income comes from, only whether it is substantial enough to repay the loan through scheduled monthly payments. 

Any kind of fixed income that is regularly deposited into your bank account is considered income – no matter the source as long as it is consistent. This required income can include disability benefits, spousal benefits, child support, Social Security, and many other sources. The main thing that matters is whether the income is high enough to make you eligible to qualify. 

Using Secured Loans

If your Social Security income is not considerable enough to be approved for a loan, there may still be some options available. Many low-income individuals are able to get funding through secured loans, which may be easier to qualify for. These loans are protected through the use of collateral so that your income and credit score will pose less of a risk to the lender. A very common secured loan is a home equity loan, which uses the equity built up in your home as collateral. The main difference between unsecured and secured debt is that secured loans require collateral, while unsecured loans do not. 

When considering a loan with limited income, it is absolutely essential that you weigh the dangers carefully before making any decisions. The last thing you need when you are already experiencing financial hardship is to take on a personal loan that you cannot afford to pay back. Do your research as thoroughly as possible and budget out your repayment before going through with a loan of any kind. 


Are there any government programs that offer financial assistance to seniors instead of taking a payday loan?

Yes, there are government programs that offer financial assistance to seniors, such as the Supplemental Security Income (SSI) program, Medicaid, and other state-specific assistance programs. These can be preferable alternatives to a payday loan for those needing financial support.

If I start receiving Social Security payments early, can I later stop them and restart at a higher rate at full retirement age?

Yes, you can voluntarily suspend your Social Security payments if you start them early and then restart them later, preferably at full retirement age, to potentially receive a higher rate. However, specific rules and time limits apply for suspending and restarting benefits.

Can I use my future benefits as collateral for a loan?

No, these benefits cannot be used as collateral for a loan. The law prohibits creditors from using these benefits as security for loan payments.

If I start receiving Social Security benefits early, can I later stop them and restart at a higher rate?

Yes, you can voluntarily suspend your benefits and restart them later to get a higher rate. However, this option is only available after reaching your full retirement age and there are specific rules and time limits for suspending benefits.

Are there any specific loan products designed for retirees or those on Social Security?

Some financial institutions offer loan products tailored for retirees or those on Social Security. These loans consider the unique financial situations of older adults, but it’s important to carefully review the terms and conditions.

How does receiving a loan affect my Social Security?

Generally, receiving a loan does not affect your Social Security. However, if the loan is not spent immediately and adds to your resources, it could potentially impact your eligibility for Supplemental Security Income (SSI).

Can I repay a loan with my Social Security?

Yes, you can use your Social Security to repay a loan. However, it’s important to budget carefully to ensure that your basic living expenses are also covered.

What should I consider before taking a loan during retirement?

Before taking a loan during retirement, consider your ability to repay the loan, how it will affect your overall financial health, and whether it might impact your beneficiaries or estate.

Are there any government programs that offer financial assistance to seniors instead of taking a loan?

Yes, there are government programs that offer financial assistance to seniors, such as the SSI program, Medicaid, and other state-specific assistance programs. These programs can provide support without the need for a loan.

A Word From CreditNinja on Borrowing Money From Social Security

If possible, you may want to avoid borrowing money from your retirement fund at all costs. Instead, CreditNinja suggests you consider the following when you run into financial emergencies: 

Dip into your savingsUse funds from your savings to cover immediate expenses.
Ask a friend/family member for a small loanSeek a small loan from a trusted friend or family member, clearly outlining terms and expectations.
Organize your finances to free up budgetReview and adjust your budget to create room for necessary expenses. This may involve cutting unnecessary expenses.
Acquire a second stream of incomeExplore additional sources of income, such as getting a second job or having a garage sale, to supplement your finances.

But what if none of these options are available to you? In that case, look into personal installment loans with the help of CreditNinja. We have been an accredited lender since 2018 and may provide more competitive rates and terms compared to quick cash loans or payday loans! 

1. Policy Basics: Top Ten Facts about Social Security | CBPP
2. How You Can Use Your Social Security Benefits as an Interest-Free Loan | Elder Law Answers
3. Can You Get a Loan While on Disability? | The Ascent
4. Can you get a personal loan while on Social Security? | Fox Business

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