When the pace of single-family homes slows, the seniors housing industry takes a hit. Without the proceeds from the sale of a house, many seniors can't afford the rents at private-pay assisted living buildings and other properties. An assisted living apartment now averages about $3,000 a month.

A new consumer loan program being rolled out nationwide might help fill rooms and provide a short-term solution for cash-strapped families. Offered by Elderlife Financial Services, of Washington, D.C., the program provides an interest-only unsecured line of credit for up to $50,000. It can be used to cover move-in fees, deposits and rent.

“We are creating the VISA (card) of senior living," says Elias Papasavvas, Elderlife founder and CEO. "Up until now, seniors needed an $8,000 check on the spot just to get in." Under one loan scenario, for example, a family would pay $82 the first month.

With the cost of housing and care rising, building operators struggle with how to make apartments affordable to more people. Some states are testing programs to subsidize assisted living. Consumers foot the bill in most cases.

But it remains to be seen if a loan program to finance senior living will be widely accepted, experts say. It depends on whether building operators are willing to offer the loans and how consumers react to the idea.

The Elderlife loans are designed for private-pay assisted living or independent living buildings. The loans act as a kind of bridge funding, Papasavvas explains, meant to cover costs until the senior's home is sold after which the loan is repaid. (The loan can be repaid anytime.)

The loans aren't meant for skilled nursing facilities, or to cover the big entry fees at continuing care communities. However, Papasavvas says he intends to eventually expand the program to cover all segments of senior living.

A pilot program has been running for five years at 15 communities in two states. Though results vary by building, Papasavvas says occupancies increased at some properties by as much as 5%. The program was expanded nationwide last fall. Several hundred buildings have signed up to offer the loans, and Elderlife is on track to have about 600 properties on board by the end of 2008, Papasavvas says.

Large operators such as Five Star Quality Care, Horizon Bay Senior Communities, and some properties owned by Brookdale Senior Living offer the loans. To date, Elderlife has received $2 million in loan applications, and approved credit lines totaling $1.2 million. The company has funded more than $800,000. The average loan drawdown has been about $16,000. Most loans are repaid within a year. No defaults have occurred, Papasavvas says.

The loan's interest rate floats and is pegged to the prime rate —similar to that of an unsecured personal loan. The rate is higher than a home equity line of credit but lower than a credit card rate, Papasavvas says. In late January, the Elderlife Web site used an interest rate of 11.50% to help consumers calculate monthly costs.

Elderlife processes loan applications in several hours, Papasavvas says. The building manager does not have to review the loan application. Approved loans are funded in 72 hours. Elderlife pays the building directly. The loans are funded by Milwaukee-based M&I Bank FSB.

Nearly all loans require the signature of an adult child since most seniors will not qualify for an unsecured line of credit, Papasavvas says. Up to six family members can co-sign the loans.

Wilburn Gardens, an assisted living building in Fredericksburg, Va., has offered the loans for about five years. The building has 96 rooms. Residents pay a one-time non-refundable move-in fee of either $7,500, $5,000, or $2,500, depending on the contract selected. The average monthly rent for an apartment is $3,200.

At any given time, the loans are being used by several residents, according to Karen Bland, executive director at the building. She thinks the program is a good way to get an elderly parent into the building quickly while the family straightens out the senior's finances. The program also helps seniors who could not have otherwise afforded to live in the building. The bottom line, says Bland, “is that it has definitely helped our occupancies.”