money Interest in divorce loans jumps during coronavirus pandemic
The coronavirus pandemic hasn’t been great for love. It derailed weddings and honeymoons — and some married couples are so eager to split that they’re looking to take out loans to fund divorces.
The number of inquiries to fund a divorce that Loanry received was up 62% through November 2020 compared with all of 2019, according to the online loan marketplace company after analyzing search divorce-related queries it received from Google during those periods. The company’s data, broken down by state, also indicated that the largest divorce inquiry increases came from Tennessee, Texas, and Georgia.
“2020 [was] a stressful year, more stressful than most,” said Ethan Taub, founder of Loanry. “And sadly we have seen the strain take its toll across the board, including in the marital home.”
The U.S. divorce rate is at a 20-year low, but Taub called today’s polarizing political environment and diverging public health opinions amid lockdowns “a perfect storm” for divorce involving couples with misaligned ideals.
However, the cost of divorce rivals that of a wedding, and some Americans are strapped for cash. According to a 2017 Bankrate study, the average divorce cost in the U.S. is $15,000.
And even in pre-pandemic times, more than a third of Americans were not equipped to handle a $400 emergency expense without leaning on credit or personal loan from an individual or financial institution.
In certain circumstances, financing a divorce with a loan can be seen as an emergency for “when you don't have an emergency fund to pay for things,” Taub said, and you “end up having to look for money elsewhere.”
A divorce loan is “simply a personal loan used for divorce,” Taub said, with the funds used to pay for costs associated with a divorce like court fees, lawyers, and mediation.
Where you get divorced also factors into the equation. The five most expensive states for divorces are California, New York, Delaware, Texas, and New Jersey, and range in average cost from $12,600 to $14,235.
Taub pointed out a correlation between the state’s income and the number of divorces being requested. Loanry conducted a Google search trend and found that people in southern states like Tennessee, Arkansas, Mississippi, Georgia, and Alabama are not only considering ending their marriages but looking for information on divorce loans.
What to do instead of taking out a divorce loan
Getting out of an untenable marriage for reasons of safety or security is warranted, but not at the risk of your financial future, Taub said.
What he suggested instead is “communication, reconciliation, kindness, and counseling,” and if money is tight, separate to avoid taking out a divorce loan and to “do your research first.”
“Take a look at the options out there and compare the different solutions to find the best and most affordable option for you,” he said, “both immediately and years down the line.”
Stephanie is a reporter for Yahoo Money and Cashay, a new personal finance website. Follow her on Twitter @SJAsymkos.
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