As of 2016, Elderlife Financial is the single organization offering a loan product that is specifically designed as a Senior Care Bridge Loan. The “Elderlife Bridge Loan” was created to help seniors and their families with the cost of assisted living, home care or skilled nursing on a short term basis.
With a bridge loan, funds are sent directly to care providers such as assisted living communities or home care agencies. In addition to convenience, this also helps protect the senior from a misuse of funds. Some cash can also be provided directly to the family to help pay for relocation, incidental and unexpected costs. The loan is unsecured and is typically made on a short term basis for periods of three years or less. The interest rates on the loans are tied to the prime rate.
Program Details / Pros & Cons
Elderlife's loan product is designed to serve as a bridge until more permanent financial resources can be arranged. Follows are several examples of situations in which using an eldercare loan product makes economic sense.
- When Entering Assisted Living - The costs of moving into assisted living can be significant considering monthly fees, community (entrance) fees and relocation expenses. A short term loan allows a family the flexibility to absorb these costs and ease the burden until other funds become available over the next 6, 12 or even 18 months.
- When Waiting for Veterans Benefits - The Aid and Attendance pension for war-time veterans can provide $1000s / month toward the cost of assisted living or home care. However, the average time for application processing is 9 months and many families wait as long as 18 months to begin receiving benefits. This pension is retro-active, so a bridge loan works well to cover the waiting period.
- When Selling a Home - It can take many months to prepare a home for sale, find a buyer and arrange financing. A bridge loan allows families the time to receive the best offer for the home rather than rushing a sale simply to have funds available for senior care.
- As an Alternative to a Reverse Mortgage - Reverse mortgages are popular ways to finance long term care provided at least one homeowner remains in the home. Should the owners move from the home to assisted living, a reverse mortgage is not an option. Additionally, an AARP study finds reverse mortgages make economic sense for homeowners who intend to use the proceeds for at least 5 years. A bridge loan makes sense for shorter loan periods.
The Elderlife Line of Credit is unsecured, meaning it is not backed by a home or vehicle. Therefore, a fairly strong credit score is required for approval if there is a single borrower. However, the loan is also designed to allow for multiple co-borrowers to share the cost of paying for the senior’s care. Having multiple co-borrowers lessens the need for a strong credit score from any one borrower. Since there are multiple individuals to share the risk; the more co-borrowers, the easier it is to be approved. These loans also have an extremely fast approval process. Families can be approved within 1-2 days.
The largest drawback of this option is the interest rate of the loan which is considered, by some, to be high. However, interested individuals must consider this to be a relative statement. The interest rate when compared to a home equity loan might be high but when compared relative to a credit card or personal loan, it is very reasonable. Loans can be re-paid at any time without penalty. Furthermore, some assisted living communities will pay the interest on the loan as an incentive for the senior moving into their community. Essentially, this allows families to borrow at no cost.
A final benefit of a bridge loan is that it can eliminate complexity when applying for VA pensions or Medicaid. This is especially relevant if the alternative to a bridge loan is a family loan. VA pensions and Medicaid consider the applicant's income and past asset transfers as eligibility factors. If not very carefully structured and documented, money accepted from family members to pay for care can be counted as income which can hurt a VA application or result in a Medicaid denial. Monies re-paid to family members can be considered an illegal asset transfer by Medicaid. The federal government and the Department of Veterans Affairs recognize Elderlife's financial product as a loan and this can, relative to a family loan, reduce complexity in the application process. If one is considering a VA pension or Medicaid in the future, it is strongly recommended they consult with a planning expert.
Eligibility Requirements for Elderlife's Bridge Loan
Credit Scores - These loans are typically made with multiple family members as co-applicants. Therefore, while credit scores are considered, a low credit score of any one co-applicant can be offset by the others. There are also other consideration factors aside from credit scores such as liquid assets, income and home equity.
Alternative Funding Source - As these loans are unsecured and intended as a short term solution, the lender will want to know what other source of funding will be becoming available. Most commonly this will be a lump sum from the sale of a home or from retroactive veteran’s pension benefits.
Factors NOT Considered - There are several factors worth mentioning in that they do not impact eligibility for senior care bridge loans. Since the loan is typically given to the family and not the individual in need of care, age is not a factor in eligibility. Nor is the health condition of the applicants relevant to the approval process. Marital status and geographic location also do not impact eligibility. One's veteran status is only relevant to loan eligibility if the individual in need of care is waiting for approval of veterans benefits.