Will a Loan Affect My Social Security Benefits?

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Social Security benefits are paid out for a few reasons. The amount of benefits an individual receives each month depends on his income and resources. Income from a source of employment, bank accounts, stocks, land, vehicles, personal property and any other source that could be converted into cash are all considered resources. But in most cases, a loan is not considered a resource, so it won't reduce your Social Security benefits.

Loan Effects

Social Security clearly states that a loan will not affect your SSI (Supplemental Security Income) benefits. You can borrow cash, food, shelter items or any other item that you fully intend to pay for at a later date. The funds or item you receive in a valid loan agreement are not considered income and thus not reduce your Social Security benefits.

However, it is important to make sure that any funds you borrow are spent in the same month that you enter the loan agreement. If the funds are not spent, they will count toward the SSI resource limit of $2,000 (or $3,000 if you are a married couple), and that difference will be deducted from the following month's benefit payment.

Lending Money

Social Security states that if you lend money to another individual, the money that they owe you can be considered a countable resource and as a result may affect your eligibility for benefits. If a loan agreement is in fact considered a resource, the principle balance owed to you will be used in determining eligibility. However, any interest you receive will not be counted as income.

Student Loans

If you have defaulted on a federal student loan, your Social Security benefits may be garnished to pay off the debt. Defaulted student loans can be forwarded to the Department of Treasury, which in turn may offset your monthly benefits, depending on the type of benefits you receive. Fortunately, the government will not deduct more than 15 percent from every monthly check until the debt is satisfied.

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