Loans

While it's far from ideal to borrow money for an adoption, adoptive families may find a loan necessary to cover the large and immediate expenses. In some cases, you may be able to pay the loan back quickly once you receive a tax credit or are reimbursed by your employer or the military. Possible loan sources include:

HOME EQUITY LOANS. Interest rates often are reasonable and the interest is tax deductible. Just remember, you're putting your home at risk.

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INSURANCE. You may be able to borrow from the cash value of your life insurance policy.

LOW-INTEREST LOANS. Some banks offer low-interest loans or credit lines for adoptive parents.

PRIVATE GRANT AND SPECIAL LOAN PROGRAMS. Adoption loans, both home equity and unsecured, may be obtained through the National Adoption Foundation. They also award grants to needy adoptive parents. (Refer to the Resource List for more information.)

RELIGIOUS ORGANIZATIONS.

RELATIVES.

Two other possible sources prospective parents may be tempted to use for adoption expenses are credit cards and loans on retirement accounts, such as 401(k)s and profit-sharing plans. Credit cards are an easy source of cash, but typically charge high interest rates. Loans on retirement plans offer somewhat lower interest rates; however, if you lose or change jobs and cannot repay the loan within a short time period, the loan becomes a taxable withdrawal. In addition to income taxes you'll have to pay on the withdrawal, you'll also have to pay a 10 percent penalty if you're younger than 59 1/2. Most financial planners recommend that you not tap these sources unless it's absolutely necessary.

The decision on whether to take out a loan to help pay for adoption expenses can be difficult and has serious consequences for the entire family. It's important as adoptive parents to maintain financial stability for the good of the child. Dipping into future retirement savings or running up credit card debt can add to your financial stress and family stress in general, as well as throwing your long-term goals and planning off course.