People turning to payday loans to fund funerals


Mar 11, 2016
People turning to payday loans to fund funerals

A shocking news article on the AOL website recently revealed that a staggering £576m has been borrowed in the form of payday loans to pay for loved ones’ funerals over the past 5 years.  

 

The figures also showed that:

  • over the last 5 years, in the UK we have spent £4.8 billion on funerals
  • the average funeral costs £3,733 and £1.6 billion of this has been borrowed 
  • those who borrowed turned to family and friends, while others have used personal loans
  • 27% of people (1.2m) turned to payday loans, racking up a total of £576 million debt by in order to send off a loved one
  • those in the 18-34 age band found it particularly difficult to meet the cost of a funeral, with 44% taking out a credit card
  • 40% of people assumed the cost of the funeral would come out of the deceased person's estate (not realising how long the process to free up money from the estate can take)  

This is a truly shocking state of affairs, with bereaved families not just mourning the loss of a loved one, but facing real financial difficulty in order to meet funeral costs.   

So, what is the solution?   

Many people don’t think actively think about their death or who will pay for a funeral when the time comes. But there are a number of things you can do in order to put your – and your loved ones’ – minds at rest. 

   

Over 50s life insurance   

For people on a tight budget and who cannot get life cover elsewhere (perhaps due to a pre-existing medical condition), then over 50s life insurance could be suitable.   

This provides a cash sum when you die, helping towards the costs of your funeral.   

As long as you are aged 50 or over (or even 60, 70 or 80), you are guaranteed acceptance in to one of these plans - without needing to complete a medical declaration.   

At the time of writing, premiums start as low as £3.90 a month, ranging up to £50 a month. The sum insured (the amount that your loved ones will receive when you die) will be fixed at the time you take out the cover – so if you are on the younger side, do take in to account inflation. So while £10,000 may seem enough now to cover a funeral, if you die in 20 years’ time, £10,000 may not cover your funeral costs at all.   

Choosing your plan   

There are a number of additional benefits with different over 50’s life insurance plans, for example, some provide: 

  • full cover after 12 months, while with others you have to wait 24 months
  • funeral contributions (amounts of £250-£300 are not uncommon) 
  • a free gift for signing up   

We recommend carrying out an over 50s life insurance comparison to find the most appropriate plan for you.   

One thing to note – if you are in good health, you may find you can get up to 40% more cover for the same cost with a traditional life insurance policy, so this is worth considering if you have no pre-existing medical conditions.   

Pre-paid funeral plans  

If you are not on a limited budget, or have some money put away already for your funeral costs, then you may wish to consider a pre-paid funeral plan.   

This does exactly what it says on the tin. You pay for your funeral in one lump sum payment or over a number of months at today’s costs. Then, when you die, whether that is 10, 20 or 30 years down the line, all your funeral costs are paid for.  

The facts:

  • funeral costs have risen by around 6% over the last 10 years, outstripping the rate of inflation
  • the average cost of a funeral was £1,920 in 2004
  • prices are predicted to exceed £6,490 by 2025.   

This is an inflation-busting way to ensure you get the funeral you want without those you leave behind having any financial burden.   

Choosing your pre-paid funeral plan   

As with an on over 50s life insurance plan, different providers offer various benefits, so it is worth carrying out a funeral plans comparison.   Finally, it is important to check that the plan provider is authorised by the Funeral Planning Authority, as this protects you and your family by safeguarding your money and the service you receive.   

Summary  

None of us like to consider our mortality and taking out a life insurance or funeral plan may seem morbid. But consider what may happen if you don’t – your children or partner could be left paying off an expensive debt at an already difficult time.    


Ashley Shepherd is an Over 50s Personal Finance Expert

ashley shepherd

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