Adoption Loans: How to Finance an Adoption

Adopting a child takes time and money, with the average adoption costing between $20,000 and $40,000. Good financial preparedness and funding strategies can help facilitate a smooth adoption process for both the child and the parents.

Let’s review the pros and cons of each adoption financing method so you can make an informed financial decision.

Understanding adoption costs

The cost of adoption can vary greatly based on your chosen adoption agency and other factors. Here is a breakdown of the typical expenses for an adoption so you can know what to expect.

Agency fees

Adoption agencies will offer various services, including matching, counseling, program fees, coordination with authorities, and more. The total cost of working with an agency to adopt a child typically ranges between $15,000 and $40,000.

Legal and court fees

Attorney fees vary based on what attorney you choose and how complex the adoption is. Usually, attorneys will charge around $2,000 for an adoption.

Court fees depend on your jurisdiction, adoption type, and other legal requirements. They usually cost between $500 and $2,000.

Travel expenses

Transportation can be expensive if you need to travel to meet the child and the birth parents or cross borders for an international adoption. This may cost anything from a thousand dollars to much more depending on your adoption process.

Home study costs

A home study needs to be completed during the adoption process. The adoption agency’s social worker will perform the mandatory home study to determine whether you are ready to mentally, financially, and emotionally provide an adopted child with a loving and secure home.

Home studies typically cost between $1,000 and $3,000.

Post-adoption services and costs

After adoption, there may be other services and fees you need to pay. For example, counseling can cost several hundreds or thousands of dollars.

Differences based on type of adoption

The type of adoption can affect the cost.

Domestic adoption: Adopting a child in the United States costs around $20,000 to $45,000 on average.

International adoption: If you adopt a child across international borders, it can cost from $25,000 to $50,000. The process may cost even more depending on the chosen country of adoption.

Foster care adoption: Generally, adopting a child from foster care is the most affordable option. Local governments often subsidize foster care adoption, covering various adoption-related costs if the child comes from foster care.

What are adoption loans?

An adoption loan is a type of personal loan that helps prospective parents navigate the high upfront costs of the adoption process. The loan may cover adoption agency costs, court fees, and other adoption-related expenses.

Differences between adoption loans and other personal loans

A generic personal loan may be used for a wide variety of purposes. Common usage examples of a personal loan include:

• Debt consolidation
• Medical bills
• Home improvement
• Emergency expenses
• Major transactions

Types of adoption loans

Unsecured personal loans

Personal loans for adoption can be either secured or unsecured.

Unsecured adoption loans don’t require any collateral. The main factors used by lenders to make loan decisions are your creditworthiness and your financial stability. If you have good credit, you can be approved for high loan amounts and low interest rates. However, if you have poor credit or don’t have established credit, it can be hard to receive an unsecured adoption loan.

Secured adoption loans require you to offer valuable assets as collateral before you can be eligible for the loan. The advantage to seeking out a secured loan is that if you have an asset to use as collateral, it is easier to be approved for a loan. Secured loans are lower risk for loan providers.

Benefits of using adoption loans

Immediate access to funds

An adoption loan is a quick way for adoptive parents to cover the high upfront costs of an adoption. Sometimes, for an adoption procedure to be successful, it requires timely funding and swift decisions. Compared to building your family savings and other financing options, an adoption loan can provide you with faster access to funds.

Flexibility in repayment

Depending on your adoption loan provider, you can opt for different terms to find the best repayment schedule. Personal loans usually have loan tenures ranging from 12 to

Potential for low-interest rates

If you have good creditworthiness, it is highly likely you can find an adoption loan with favorable terms and low interest rates. This allows you to save money over the life of the loan since you won’t have to pay as much interest.

Allows for comprehensive financial planning

If you know you have secured adoption funds from an adoption loan, you can enjoy a less stressful and uncertain budgeting process. Many prospective parents have benefitted from the predictability that comes with an adoption loan.

Potential drawbacks of adoption loans

Purpose specific

If you opt for an adoption-specific loan, you might not be able to use the money for other purposes. This restriction can be inconvenient if you find yourself needing to use the loan funds for other expenses and goals that are not specifically approved by the lender. In those cases, you would then need to apply for a new loan, resulting in the need to pay application fees multiple times.

Debt accumulation

Taking out a loan means adding an extra debt to your name. If you have existing financial obligations, an adoption loan can make it harder for you to pay off your other debt.

Interest and fees

Make sure you fully understand the total cost of the loan over the loan tenure. Other than the interest rate, consider the following potential charges:

• Late payment fees
• Origination fee
• Application and processing fees
• Prepayment penalties if you pay the loan off early

Financial strain down the line

Evaluate whether you are able to continue loan repayment even if job loss or other financial hardships arise. Consider how adoption and child care will affect your financial standing and savings.

Credit impact

Loan applications and repayment can affect your credit score. When applying for a loan, potential lenders will perform hard credit checks in order to evaluate your creditworthiness. Each hard inquiry can dip your credit score by around five points. If you want to compare numerous loan offers to find the most competitive rates, the credit impact can ramp up.

After obtaining an adoption loan, you will have the opportunity to build credit by repaying the loan according to the loan terms. However, if you can’t pay the installments regularly and on time, this inconsistency can greatly damage your credit score.

Grants and scholarships for adoption

Many non-profit organizations and foundations offer assistance for those looking to adopt. The main advantage of an adoption grant is that you won’t need to pay it back.

Here is a list of well-known adoption grants and scholarships. Each option comes with its own eligibility requirements, application process, and terms. Many adoption grants encourage compassionate, prospective parents to adopt, with there being no application fee.

• A Child Waits Foundation
• Help Us Adopt
• WAT! (We Adopt Too) Black Family Adoption Assistance
• Gift of Adoption
• Lifesong for Orphans

Employer assistance and benefits

Some companies offer additional financial support and benefits to employees who choose to adopt a child. Employer-provided adoption benefits may cover costs for adoption agency fees, legal fees, medical expenses, transportation, counseling, as well as court expenses.

While employer-provided adoption benefits are not commonplace yet, an increasing number of businesses are opting to provide financial assistance to employees. Being able to provide flexible, adoption-friendly benefits can grant a company a competitive edge. It is a good way to promote goodwill and a supportive environment.

Depending on where you work, your employer may even offer other kinds of assistance. For example, some companies are able to connect employees to adoption networks and agencies. Reach out to your company to see whether it offers adoption-related benefits and assistance.

Tax credits and deductions

Adoption tax credit

You may be able to qualify for tax benefits. The adoption tax credit can be taken for qualified adoption expenses that go toward adopting an eligible child. According to the IRS, an eligible child means a child under 18, or a child who is mentally incapable of self-care.

Qualified adoption expenses for the adoption tax credit include:

• Adoption fees (both reasonable and necessary)
• Court costs
• Attorney fees
• Transportation expenses
• Other costs directly related to the adoption

Note that there are income and dollar limitations associated with the tax credit. Exact limitations and terms can change from year to year.

Other tax considerations for adoption

If you’re interested in learning more about taxation, adoption credit, and adoption assistance programs, make sure you check out the IRS’ latest guidelines. Prospective adoptive parents can benefit from other potential tax breaks and deductions related to adoption.

Tips for financial planning during the adoption process

Budgeting

Before beginning the adoption process, it is advised to figure out how much money you need for each step. The costs of adoption can vary significantly based on numerous factors.

Track all your adoption-related expenses to get a better idea of your finances and needs.

Research

Try to consider all financing options available to you before committing to an adoption loan. What’s best for one family may not be ideal for another. Find the avenue that aligns best with your current needs as well as future goals.

Consultation

It could be helpful to work with expert financial advisors and legal professionals who are familiar with the adoption process. Personalized guidance can be particularly beneficial if you’re opting for an international or foster care adoption.

Backup plans

Prospective parents interested in adoption should have contingency funds or backup financial plans in place. If the preferred financing method does not work out, the adoption could fall through. This can be painful and distressing. Make sure there are contingency plans so you can deal with any unexpected expenses or needs during the adoption process.

Alternatives to adoption loans

If you want to finance an adoption without taking out an adoption loan, here are some of the common alternatives.

Home equity loans

If you want to secure a large amount of funds with a high chance of success, you might want to use your home equity to finance adoption. Home equity loans let you borrow money against the home equity that you have built.

The major downside to home equity loans is the potential to lose your property if you fail to repay the loan completely. A loan default can lead you to lose the home that was used to secure the home equity loan.

Credit cards

A credit card could be a viable way to pay for adoption-related expenses. However, it is critical to understand the risks and rewards of using credit instead of debit or cash for adoption costs. Credit cards tend to come with higher interest rates than other financing options. While they are extremely convenient for everyday, smaller purchases such as groceries, they are not ideal for major transactions.

If you do end up using a credit card for adoption-related expenses, make sure you pay down the balance as soon as possible to reduce the chances of negative financial and credit impact.

Traditional personal loan

You might want to take out a personal loan without any specific usage restrictions. This way, you may be able to use the loan funds with more flexibility.

Credit union loan

Many credit unions offer their members loans with more favorable rates. If you belong to a credit union, you can check to see if there are any promotional loan offers or financing options available for adoption.

About The Author

Ru Chen

Content Writer

Ru Chen is a content writer with several years of experience in creating engaging and well-researched articles. She mostly writes about business, digital marketing, and law. In her free time, she can be found watching horror movies and playing board games with her partner in Brooklyn.

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