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You’ve done the research, you’ve made the decision to adopt, and you’re ready to get started building your family. But one thing is standing in your way – how do you cover the unknown, generally expensive costs associated with adoption? And how do you determine which financing options are best for your family?

“Unfortunately, there’s no easy answer or one-and-done solution,” said Todd Patrick, Product Management Director with First Merchants Bank.

Choosing to adopt a child can put a great strain on finances, especially since the cost isn’t always set in stone. Experts estimate that a domestic adoption can cost anywhere from $15,000 to a whopping $70,000 – depending on a number of variables including, at minimum, adoption style, organizations utilized, and legal fees.

And would-be-parents researching how to pay for adoption will likely realize one thing, very quickly:

“It can be intimidating,” Todd explained. “There’s a tremendous amount of information and options available and knowing which matches your situation can be daunting.”

However, despite how complicated things may seem on the surface – paying for the adoption process doesn’t have to be difficult.

“The solution, really, is to practice good financial sense,” Todd said. “Talk to your banker, talk to your financial advisor, do your research, and make sure you don’t overextend yourself.”

And finding ways to cover the cost of adoption can be as simple as leaning on traditional financing options – at least in part. Future parents can make use of credit cards, apply for personal loans, utilize a line of credit, or take out a home equity loan or line of credit.

For many, a loan or a line of credit may be a good place to begin – and both have their pros and cons when it comes to covering adoption costs.

“When adopting, you may not need all the funds as an immediate lump sum, as you would receive if you took out a loan – rather, you may need money over time as expenses rise,” Todd explained. “But the lower interest rate and predictable payments of a loan can be more advantageous to the budget of a growing family.”

Using a Personal or Home Equity Loan

If you take out a Personal Loan or Home Equity Loan to help cover the cost of adoption, you can expect to receive a lump sum of money to help cover the cost. While you may not need the entire sum upfront – after all, adoption has associated costs that can be spread out over months or years – this option often offers lower interest rates – between 10 and 20 percent for a personal loan and between 7 to 10 percent for home equity loans – as well as clear expectations of when it should be repaid.

“For example, if you hypothetically took out a 10-year, $15,000 personal loan, you could probably expect to pay about $250 a month for 10 years,” Todd said. “If you’re using a loan variety that includes collateral – like a home equity loan – your payment could be lower, maybe $200 per month.”

The lower payment and limited timeframe can make this option more budget friendly and easier to plan around. However, if borrowers don’t have a mortgage or other assets to put up as collateral, such loans often require a solid credit rating in order to land a lower interest rate.

Using a Line of Credit

By and large, taking out a credit card or other line of credit can seem like the most accessible option to those looking to adopt. Lines of credit can come with high limits, they have no repayment timeframe, costs can easily be charged as they arise, and the amount can be renewed as long as you make the required payment.

“Most people already have a credit card or two, so this can be a really easy way to begin covering the cost of adoption,” Todd said. “However, you do have to be careful – while they’re accessible, they’re also often more expensive over time due to higher interest rates. They’re often anywhere between 15 and 25 percent interest.”

For example, borrowing that same $15,000 via a line of credit could potentially result in monthly payments as high as $300 – which could create even more of a shoestring budget for younger families.

Additionally, credit card payments typically aren’t structured to be paid off within a set period of time – which can leave borrowers in a bit of a gray area.

Borrowers who have a lot of equity in their home can take out a Home Equity Line of Credit (HELOC), which may carry lower interest rates – but this may not be an option for many young people looking to start families.

“Building up equity in your home takes time,” Todd explained. “A lot of younger individuals and couples just haven’t had the time to build up the kind of equity you’d need to cover adoption through a HELOC or Home Equity Loan – or they may not own a home at all.”

Using your 401(k)

It’s also possible for future parents to borrow from their 401(k) in order to cover the costs of adoption. This option can be similar to taking out a loan, Todd explained, in that the money will need to be paid back within a specific period of time.

“It can be a solid option, but there are a lot of stipulations and restrictions that go along with it,” he said. “For example, if you change jobs during the payback period you may be required to pay the amount back in full, immediately. If that’s not possible, you could be subject to tax and retirement consequences – including monetary penalties.”

To determine if this is a viable option, those thinking about using a 401(k) should talk to an account representative to ensure they understand their program and the restrictions their account carries.

Other Ways to Pay

No matter which way you slice it, adoption can be expensive – which means many future parents will need to rely on a host of different financing options to cover the cost.

Some may lean on tax credits from federal, state, and local governments to recoup some of that cost. Some may depend on grants from various non-profit organizations – though these are not guaranteed funding sources, and typically only cover a portion of adoption costs.

Plan, Plan, Plan

Whatever you choose, it’s important to ensure that you’re making sound financial decisions.

“I would highly recommend talking to a financial professional – like a financial advisor or your local banker – to get a full understanding of your options, weigh the pros and cons of each, and to determine that your credit is in a good place should you need to apply for a loan or a line of credit,” Todd said.

And it’s important to lay out the steps you need to take, one by one, so that you can easily create a sound financing strategy. To that end, those looking to adopt should consider these questions:

  1. How much do I need to cover the cost of adoption?
  2. Depending on my credit score, income, and assets, how much can I be approved to borrow?
  3. How much can I actually afford to borrow?
  4. Should I consider a loan, a line of credit, or another option – or some combination of these?

The most important thing, however, is to not lose hope.

“My wife and I actually pursued IVF a few years ago,” Todd shared. “It’s not adoption, but it is also an expensive process, and it allowed me to understand that desire to build a family when your options are limited. So, I do understand the stress and worry – not only about the financial aspect but about the future and familial aspects, as well. ‘Will it work out? Will I be able to create the family I long for? What can I do?’ The important thing is to not give up – there are so many options and resources available to help you succeed in this new journey you’re setting out on. Just don’t give up.”

To talk to one of our welcoming, dependable bankers about your options, visit your local banking center.