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Divorce is a difficult thing to go through, and the financial side of it can only add to the stress. Court costs, attorneys' fees and expert consultation sessions can add up quickly, potentially bringing the price of your divorce to thousands of dollars.
If your divorce is complex, you might also need to pay child custody and real estate evaluators, accountants, financial planners and more. Also, think about where you'll live and what you'll drive once your divorce is finalized, and how you'll pay for that.
So what do you do if your savings alone are not enough to cover such expenses?
You can start by looking into various types of loans, as well as ways to bring down costs and budget for them. Read on to find out what your options are.
Consider Applying for a Personal Loan
If you have good to excellent credit, and you can evaluate ahead of time how much your divorce is going to cost you, a personal loan can be a good option.
A personal loan can help you beyond just legal fees—you can use it to pay for any expense. While you could put expenses on your credit card, personal loans typically come with lower interest rates if your credit is in good shape.
Moreover, a personal loan might allow you to borrow a larger sum than your current credit card's limit would offer. A loan is especially helpful when you need a significant amount of money to cover your divorce costs and need several years to pay it off. You'll repay a loan in fixed monthly installments, which makes it easier to budget for.
If your credit scores could use some work, a personal loan might not be the best choice. While it could be possible to qualify, a high interest rate could greatly increase the cost of borrowing. It's also important to make sure the loan is within your budget. Missed or late payments will hurt your credit score and financial standing, only adding to the stress of divorce.
Look Into Peer-to-Peer Lending
Peer-to-peer (P2P) lending is an alternative to traditional banks and credit unions. It works by pairing investors willing to issue a loan with potential borrowers who are likely to agree to their terms. The main advantage of loans through a P2P lender is they may offer lower interest than are offered by traditional loans. However, that's not their only benefit.
A P2P loan is relatively hassle-free. The application process is simple, and everything is handled online. It starts with a preapproval screening that generates loan offers using a soft inquiry to check your credit. Unlike hard inquiries, soft inquiries don't hurt your credit score. That gives you an opportunity to shop around, compare loan terms and choose the best offer.
Once you review your options and accept one of the offers, the lender normally performs a hard credit inquiry and may ask you for additional information, which you'll submit online. It can take a few days to get the lender's decision. Once you're approved, you'll set up a payment process.
While P2P lenders may have advantages over traditional credit sources, they also generally have stricter credit and income requirements. If you're not sure you can meet them, it might be a good idea to look into alternative options.
Borrow From Friends and Family
When you're going through a divorce, there's nothing wrong with asking for help from those closest to you. You don't have to go it alone: Your friends and family might be able to offer not only emotional support, but financial support too.
Before you ask relatives or friends to lend you money, however, you should make sure you have a plan to pay it back. Such a loan may be interest-free, won't require a credit check and won't hurt your credit if you fail to repay it. Still, reneging on your loan can definitely damage your relationship with people who are dear to you.
Other Ways to Cover Divorce Costs
While financing your divorce can help you pay for it, there are actions you can take to make it more affordable. Look into these options to potentially reduce the costs.
Ask Your Lawyer if They Offer a Payment Plan
A divorce can be next to impossible to navigate without legal representation. Family lawyers often charge a hefty fee for their services, especially if they include representing you in court. Luckily, some of them also offer payment plans.
It can be a good idea to speak with the lawyer you're interested in working with and discuss your options. They may be more than willing to accommodate you and structure a plan that works for you. Your attorney might ask you to pay the initial retainer first, after which you would pay in monthly installments.
While some lawyers might charge interest or extra fees, a payment plan can still be a simpler, less-expensive way to pay for legal representation. Since an attorney payment plan doesn't always require a credit check, it can also be a good option if you have less-than-stellar credit.
Get a Court Order
The court can order your spouse to advance your attorneys' fees or reimburse them. This could be possible if your spouse's income is significantly higher than yours, or if your spouse is being uncooperative or delaying the divorce process.
If you believe you have a strong legal case, you might want to look into this option. Rules for awarding attorneys' fees vary from state to state, so it's best to consult with a family lawyer before asking the court to award your legal fees.
Create and Maintain a Budget
Maintaining a budget is important at every life stage, especially during the divorce process. It's essential to keep track of your expenses and resources now that you'll be living on one income. It will help you cut costs and develop a strategy to finance your divorce.
Whether you're borrowing money or have a payment plan, creating a budget can help you keep up with your payments. There are multiple budgeting methods to choose from, but each one will have you determine your income and expenses, set budget goals and keep track of your spending. While it might not sound that exciting, a budget can make it much easier and less stressful to finance your divorce.
The Bottom Line
Divorce can be hard not only emotionally, but financially as well. Fortunately, you have options that can make it easier to pay for the various costs associated with dissolving a marriage. No matter your income and credit score, there are resources out there that can help you figure it out.
While money problems can bring a lot of stress, it's wise to focus on yourself and work to build your new life instead.