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Adoption Financing

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Before you take a loan out from someone else, consider borrowing from yourself. Many company 401k plans allow employees to borrow up to 50 percent of their current 401k balance. The big advantage of this is that you are paying yourself interest. The downside is that if you change companies, you will be expected to pay off the loan or take the 10 percent tax penalty on the loan amount as an early withdrawal.

Some agencies will encourage you to take out a new low-interest credit card to pay adoption related bills. Then you can pay off the credit card with your tax credit before the rate goes up. For domestic adoptions, this may work well; however, given the potentially long timeline of an international adoption, you may end up paying higher interest long before the tax credit comes back.

Another alternative to consider is a home equity loan. These are typically low interest loans that come with a check book you can use to write checks to pay your bills. The biggest advantage here is that interest from a home equity loan may be tax deductible. However, some financial advisors recommend using credit cards instead of home equity loans since credit cards are unsecured debt. If you get in trouble paying off a home equity loan, you could lose your house.

Most banks do not specifically offer adoption loans, but there are numerous organizations that do offer low- or no-interest loans for adoption. Also, ask your adoption agency about their grant programs. Most larger agencies have some sort of financial aid available.

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