Can a moving loan help your move? Find out here – Forbes Advisor
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Whether you are moving to another city or state, moving can be expensive. You might need money to pay for a moving truck or movers, new furniture, or your security deposit. If you don’t have the cash on hand to cover these expenses, a moving loan can help fill the void.
Before taking out a home relocation loan, find out what they are and how to compare your options to understand if it’s the right choice for your situation.
What is a moving loan?
A moving loan, also known as a moving loan, is an unsecured personal loan that you can use to cover your moving expenses. Unsecured loans do not require you to use any personal property to secure the loan. Since the loan is unsecured, lenders base your eligibility on factors such as your credit score, income, and debt-to-income ratio (DTI). As with other types of personal loans, you will have to repay your loan in fixed monthly installments.
When should you take out a moving loan?
Although the answer will vary depending on your financial situation, it may be a good idea to get a moving loan if you can get a good interest rate and pay off the loan as promised. However, if you think it may be difficult for you to pay off the loan, it’s probably a good idea to avoid taking one. Late payments can damage your credit score, making it more difficult for you to qualify for future loans.
How to get a moving loan
- Search for lenders: To find lenders who offer home relocation loans, search for the best personal loans online. A good place to start could be a lender comparison website. While you’re at it, take a close look at each lender’s terms, minimum credit score requirements, fees, and Annual Percentage Range (APR). Additionally, you can check with your local bank or credit union to see if they offer personal loans for the move.
- Prequalification with several lenders: Once you’ve refined your list of top lenders, prequalify with each of them (if available). This allows you to see the conditions and the APR you might receive if approved. Make sure the lender performs a smooth credit check to protect your credit score from any pitfalls.
- Determine how much you need to borrow: Estimate your moving or relocation expenses to see the amount of a loan you need to take out. Different lenders have different minimum loan amounts. Additionally, some states have rules regarding the minimum amount you can borrow, which may affect your loan amount.
- Apply for your moving loan: After selecting the lender that matches your needs, complete the application process. Be prepared to provide the lender with personal information, such as your income, date of birth, and Social Security Number (SSN). Some lenders will ask you to provide W2s, pay stubs, or bank statements to confirm your income.
- Wait for the lender to make a loan decision: After your application, wait for the lender to review your application. Some lenders can get you approved in seconds, while others can take longer. If a lender refuses your loan, ask them for an explanation. Applying with a co-borrower or co-signer, improving your credit score, reviewing your credit report for errors, or asking for a lower amount can improve your chances of approval.
- Sign the loan agreement and receive funds: Once approved, the lender will send you a loan agreement to sign. After signing the agreement, the lender will most likely deposit your funds directly into your account. The financing time varies among lenders: some lenders may issue the funds on the same day while others may take a week or more.
- Pay off your loan: Finally, repay your loan as promised. Making late payments or defaulting on the loan can hurt your credit rating. Setting up automatic payment is one way to make sure you never miss a payment.
Benefits of moving loans
- Quick access to funds: If your loan application is approved, some lenders may deposit your funds into your bank account the same day or during the week.
- Flexible loan terms: Some lenders allow you to take out personal moving loans with loan terms as short as 12 months and as long as 84 months. A long-term loan may have a lower minimum monthly payment, which might better suit your budget. However, the downside is that you will pay more interest over the life of the loan.
- Lower interest rates than credit cards: Average interest rates for personal loans are generally lower than those for credit cards. If you have a good credit rating (at least 670) and a stable income, you may be able to get a good interest rate, an interest rate lower than the national average.
- No collateral required: Since moving loans usually don’t require any collateral (an asset that secures the loan), you won’t have to worry about a lender taking your asset (at least without court clearance).
Disadvantages of moving loans
- Fresh: Some lenders charge origination fees of between 1% and 8% – these fees can be a huge inconvenience since the lender usually subtracts them from your loan amount. Other common personal loan fees include application fees, returned check fees, late payment fees, and prepayment fees.
- Potentially high interest rates: If you have less than stellar credit or a minimal credit history, your lender may charge you high interest rates. Some lenders have APRs over 30%.
- Missed payments can damage your credit score: If you miss a payment or default on the loan, it can damage your credit score. This will make it more difficult for you to qualify for future loans.
Moving loan solutions
If you want to avoid the potential drawbacks of a home relocation loan, consider these alternative options to help cover your moving expenses or rent.
0% APR Credit Card
Borrowers with good to excellent credit scores (at least 670) can avoid paying high interest and fees with a 0% APR credit card. These cards come with interest-free promotion periods, which can last up to 21 months. If you pay off your balance before the promotion period expires, you won’t have to worry about paying interest. However, vendors will charge interest on unpaid balances after the introductory period ends.
Family loans are another way to avoid paying interest or paying minimal interest when it comes to your moving expenses. With this option, you can also skip the formal loan application process. The loan agreement between you and the family member should spell out the terms and conditions of the loan. Pay off the loan as promised to avoid damaging your relationship.
Alternative payday loan
If you can’t qualify for a home relocation loan or are having trouble finding moving loans for bad credit, consider using an alternative payday loan. Some federal credit unions offer these loans, which are designed to help you avoid the high interest charges of payday loans. You can borrow up to $ 2,000; the term of the loan ranges from one to 12 months and the maximum interest rate is 28%. To use this option, you must be a member of a federal credit union or be eligible for membership.
Instead of using a personal loan to relocate, it might be better to use your savings, if possible. If you know how much it will cost, create an automatic savings plan to cover most or all of your relocation expenses.
If you are moving for a new job, ask your new employer if they will cover part of your moving expenses. Some employers offer this to employees as an incentive to accept the job offer. Even if the employer doesn’t offer this, you can ask for a moving bonus or try to negotiate a higher salary.