Borrowing With a Disability and Poor Credit: A Guide to Your Options

Many people with disabilities face a unique financial challenge: they need access to credit, but their circumstances often make traditional lending more difficult. When you’re receiving disability benefits and dealing with a low credit score, the road to securing a loan can feel daunting. However, understanding your rights and available options is the first step toward financial empowerment. The Equal Credit Opportunity Act protects you from discrimination based on your disability status, but you’ll still need to meet standard lending requirements—and that’s where things get complicated.

Understanding Your Borrowing Challenges When Disabled and Building a Case for Approval

If you have a disability and poor credit, you’re facing two separate but interconnected hurdles. First, lenders evaluate creditworthiness through credit scores, and if yours is low, many conventional lenders will automatically decline your application. Second, your income—whether from disability benefits or other sources—must meet the lender’s minimum threshold. This combination can make approval difficult, but not impossible.

The key is understanding what lenders actually assess. When you apply for credit, lenders look at three primary factors: your credit history, your current income, and the loan-to-income ratio they’re comfortable with. For someone on disability benefits, the income component can be particularly challenging because disability payments are often modest. Additionally, if you’ve had financial difficulty in the past—which may be connected to your disability—your credit report likely reflects missed payments or higher debt levels.

The good news is that disability payments are treated like any other legitimate income source. Lenders cannot legally deny you solely because your money comes from Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI). However, they can and will deny you if your credit score is too low or your income doesn’t meet their stated requirements.

Navigating the Credit Score Barrier: Strategies for Disability Loan Approval

So what can you actually do if you want to borrow money but have both a disability and a poor credit history?

Shop strategically. Before committing to an application, research lenders who work with borrowers in your situation. Some financial institutions have specific programs or more flexible criteria for people with disabilities. You can check your loan options with multiple lenders without damaging your credit score through what’s called a “soft inquiry.” This allows you to compare rates and terms before deciding where to apply.

Consider a co-signer. One of the most effective strategies for approval when you have poor credit is adding a co-signer to your application—typically a family member or close friend with better credit and/or higher income. A co-signer essentially agrees to repay the loan if you can’t, making the lender’s risk lower. For many people with disabilities and poor credit, this is the difference between approval and rejection. However, this decision requires serious thought. If you default on the loan, your co-signer becomes legally responsible, which could damage your relationship and their financial situation.

Explore diverse loan types. Different loans serve different purposes and have varying approval criteria. Personal loans are flexible but often have stricter credit requirements. Auto loans for vehicles modified for people with disabilities exist through certain lenders like Bank of America. Mortgages have special programs, particularly VA loans for disabled veterans. Each has different requirements, and some may align better with your credit profile than others.

Timing matters for SSI recipients. If you receive Supplemental Security Income rather than SSDI, timing your loan application can be crucial. SSI operates under a means test—you must have fewer than $2,000 in countable assets (or $3,000 if married). If you receive a loan disbursement and don’t spend it all in that month, it counts toward your asset limit, potentially disqualifying you from benefits that month. The strategy is to apply for your loan near month-end so funds arrive in early month, giving you maximum time to spend the money before the next asset count.

Managing Risk: How Loans Affect Your Disability Benefits

Before borrowing, you need to understand how taking on debt might impact your benefits. The relationship between loans and disability benefits differs depending on which program you’re receiving.

The encouraging news: loans themselves are not counted as income by either SSDI or SSI. This means that taking out a loan won’t directly reduce your monthly benefits based on income limits. If you earn too much regular income, you could lose benefits—but loan money isn’t considered earned income, so you’re protected on that front.

Where SSI recipients need caution is the asset test. As mentioned above, unspent loan funds count toward that $2,000 asset ceiling. But there’s an important distinction: if you spend the loan money on specific items or services that your benefits don’t cover, you’re using it productively. The problems arise when loan money sits in your bank account at month-end.

For SSDI recipients, the concern is less acute because SSDI doesn’t have a strict asset limit like SSI does. However, if you have substantial unearned income from other sources, it could affect your eligibility, so it’s worth understanding your specific situation.

Considering the Waiting Period Dilemma

A particular challenge arises when you’ve applied for disability benefits but haven’t been approved yet. The waiting period typically takes several months—historically averaging around five months, though individual cases vary. If you’re not currently earning income and waiting for approval, getting a loan seems logical. Unfortunately, this is a risky strategy.

Lenders judge your application based on your current ability to repay. If you have no current income, approval is unlikely. Worse, approximately two-thirds of disability applications are denied on the first attempt. Taking on a loan you might not be able to repay once denied isn’t wise.

Instead, investigate programs the Social Security Administration offers specifically for this situation, such as presumptive disability payments. These provide temporary financial support while your case is being decided, and importantly, if you’re later denied, you don’t have to repay these funds (unless there was an overpayment). A loan doesn’t offer the same protection.

Beyond Traditional Loans: Alternative Financial Resources

Before committing to borrowing, consider whether other resources might better serve your needs without the debt obligation or benefit complications.

ABLE savings accounts allow you to accumulate funds specifically designed for disability-related expenses without triggering the asset limits that otherwise apply to SSI recipients. This lets you build financial security over time.

Housing assistance programs exist at federal and state levels, helping with rent, down payments, or home modifications—often a more reliable path than taking on a mortgage when you have poor credit and limited income.

SNAP benefits (food assistance) and other programs specific to disability can free up cash flow for other needs, reducing your need to borrow.

The 2-1-1 service (call 2-1-1 or visit 211.org) connects you with localized resources you might not otherwise discover. United Way’s network can identify emergency assistance, community aid programs, and services tailored to your specific situation and location.

Borrowing when you have a disability and poor credit is possible—but it requires careful navigation of both the lending system and the benefit system. Understanding your rights, exploring all available options, and thinking through long-term consequences ensures that any loan you take serves your actual needs rather than creating new problems.