If you’re in a bind and there aren’t many other options available to you, it is possible to get a personal loan for paying rent. This is, of course, if you can get approved for a rental assistance loan with your credit and income.
Before you’d get a loan for rent, you may want to evaluate the costs involved and the pros and cons. Read on to learn more about getting a loan for rent payment.
What Types of Loans Can You Use for Rent Payments?
There are a several different personal loan types that you can obtain for paying rent. These include secured and unsecured personal loans for rent assistance, as well as payday loans and cash advances.
Secured Personal Loans
Secured loans use property as collateral. If the payments on the loan are not made, the lender can take the collateral. Some types of collateral that may be used include cash savings, stocks, a car, a boat, a home, jewelry, fine art, and future paychecks.
Securing a loan with collateral may result in a lower rate, but all conditions are dependent on what the lender is willing to take and what terms they’re willing to offer on a personal loan.
Unsecured Personal Loans
Unsecured personal loans do not secure the loan using collateral. Since the lender has fewer options for recovering the funds lent, these types of loans often come with higher rates and shorter terms.
Payday Loans or Cash Advances
A payday loan, or cash advance loan, is a loan made for a short amount of time for a fee. These fees are usually expensive. Additionally, interest rates are usually steep. Every other option should be explored before you consider emergency loans for rent.
Recommended: How Do Payday Loans Work?
Reasons Why You May Need to Use Loans for Rent
Using a personal loan for rent shouldn’t be done as a matter of course, but you may come across certain scenarios where it may make sense, such as when:
• You have a short-term financial setback.
• You’ll soon have the funds to pay the loan back.
• You have a good to excellent credit score.
• You can afford to make the monthly payments.
• Your only other option is a payday loan.
Keep in mind that while there’s a lot you can use a personal loan for, taking one out still involves assuming debt. If you’re not confident you can repay a loan for rent, then it’s worth considering if you have any other options available to cover your rental costs for the month.
What Happens If You Do Not Pay Your Rent?
If you do not pay your rent, your landlord can start eviction proceedings against you. Laws vary from state to state and city to city, but it’s important to pay your rent on time.
If you know you’re going to have trouble paying rent, dig out your lease agreement and find out if you have a grace period, what the late fees are going to be, and who to contact if you need to pay late. It’s possible your landlord may offer grace and delay eviction proceedings if they’re aware of your situation.
Is It a Good Idea to Use Personal Loans for Rent Payments?
Generally, experts advise against using a personal loan for paying rent. Ideally, you should have an emergency fund that can cover these essential costs if something unexpected arises.
However, if you’ve decided this is your best course of action, there are some positive aspects to obtaining loans for rent over other potential options. Of course, there are downsides to take into account as well.
Recommended: How to Start an Emergency Fund
Pros of Using Loans for Rent Payments
Personal loans are known for their flexibility and versatility. Here are some of the upsides of turning to a personal loan for paying rent.
Potentially Competitive Loan Terms
A personal loan can come with competitive terms. If you’ve kept your credit in good shape, you may be able to qualify for a low-interest rate with low fees and a reasonable repayment term. Your credit score doesn’t have to be perfect to be approved for a personal loan, but a score higher than 670 may increase your personal loan approval chances.
Recommended: How to Get Approved for a Personal Loan
Accessibility
Personal loans are known for being very flexible. Borrowers can use them for a wide variety of purposes. For instance, you can use a personal loan for debt consolidation or to cover home renovations, an upcoming vacation, or even rent, among a number of other things. Plus, personal loans offer quick access to funds — sometimes even the same day you apply.
Possible Improvements to Credit Score
If you pay back your loan on time, having a personal loan could improve your credit score. It could also boost your credit mix, another factor that impacts your credit score.
Affordability
The interest rate on a personal loan is usually more affordable than paying interest on a credit card. Your landlord may not even be able to take a credit card payment.
Cons of Using Loans for Rent Payments
Using a personal loan to pay rent generally isn’t recommended unless it’s a last resort. There are a number of negatives you’ll encounter.
Additional Fees
Personal loans aren’t free. You may have to pay an upfront fee to take out the loan, not to mention late fees if you miss a payment or even prepayment penalties if you pay in advance.
Possible Harm to Credit Score
Your credit score will drop if you miss a payment on your loan. A lower credit score will decrease your ability to qualify for future loans on things like auto loans and mortgages.
Interest Rates
If you’re having trouble making your rent payment, other areas of your financial life may have taken a hit. This could mean the interest rate you’re given for a personal loan will be less than ideal. Even if you’ve been able to maintain great credit, you’ll still need to pay interest on a loan for rent.
Increased Debt
Personal loans add debt to your bottom line. You’ll pay more over time by financing your rent payment into a loan. If you’re experiencing financial woes, adding a loan payment on top of what you’re going through may not be a good option.
More Personal Loan Tips
It’s possible to obtain a personal loan for a wide range of possibilities, including paying rent. However, it’s important to weigh the pros and cons of getting a loan for rent before you do so. You’ll owe fees and interest, and you could harm your credit score if you’re not timely about repayment. But if it’s your last resort, a loan for rent is an available option.
If you do decide to get a personal loan — whether for covering rent or another purpose, such as debt consolidation — it’s important to shop around to find competitive offers. SoFi personal loans, for instance, have no fees required and low interest rates.
FAQs
Are you able to use loans for rent payments?
Yes, you can use loans for rent payments. You may want to examine all your options before you do, though. Personal loans carry fees and interest, and if you miss payments, you can drag down your credit score.
Is it hard to get a loan for rent payments?
It can be hard to get a loan if you have no credit history or a low income. A lender will analyze your credit score, history, and income to determine what amount you can afford to borrow and on what terms.
What type of loan is good for rent payments?
Personal loans are a very flexible means to pay for a number of things, including rent. Payday loans or cash advance loans are very expensive ways to make rent payments, and generally should be avoided.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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