Paying rent with a personal loan: What to know

If you’ve fallen behind on rent, a personal loan can help you catch up. Learn how to find the best rates and repayment terms on your personal loan. (iStock)

Millions of Americans lost their jobs during the pandemic and a recent poll found that many of them are now struggling to pay rent. The poll found that over 30% of households have used up most or all of their savings, and 19% are struggling to pay their rent.  

Depending on where you live, the consequences for not paying your rent can be severe. That’s why some borrowers consider taking out a personal loan to pay their rent. If you're considering a personal loan to supplement your rent, consider visiting Credible to compare rates, lenders and options for your individual circumstances.

Can I take out a personal loan to pay rent?

If you’re unsure where your next rent payment is coming from, covering the cost with a personal loan is an option. A personal loan is a flexible, unsecured loan that can be used for a variety of purposes, including rent. Taking out a loan for rent is similar to any other loan application. 

Personal loans come with fixed interest rates, and preapproval is relatively easy. You can apply for a personal loan through a financial institution like a bank or online lender. 

The amount you borrow will depend on how great your financial need is. Add up how much you owe in back rent and how many months of rent you anticipate needing to cover. You can use Credible’s personal loan calculator to determine how much you’re eligible to borrow.  

What are the pros and cons of taking out a personal loan?

Pros

No collateral required: If you qualify for an unsecured loan, you don’t have to put down any collateral. That means you don’t have to use your personal property or car to secure the loan.

Fast approval process: If you're looking to take a personal loan for rent, the process should be the same as for any other personal loan. Prequalification is quick and easy, and since your lender is only running a soft credit inquiry, your credit won’t take a hit. Once you’re ready to finalize the application process, your lender will run a hard credit inquiry on your credit report. 

Fast funding: Thanks to the growing number of online lenders, loan approval is often quick and easy. Same-day loan funding is a possibility, but at the very least, you should receive the funds within a day or two.  

Low rates: Personal loans tend to come with low rates, especially compared to credit cards. And because personal loans come with fixed rates, your monthly payments will always stay the same.

Multiple uses for the funds: In addition to paying your rent, you can use a personal loan to repay credit card debt or finance a major purchase. 

Cons

Good credit is necessary: You’ll need a good credit profile to secure the best loan rates. If you struggle with bad credit, you may have a hard time getting approved. And bad credit loans often come with very high rates. There are many factors affecting your credit, and working with a financial advisor can help you improve your score. 

Possible fees: Some lenders charge hefty fees for personal loans, and these can add up. For instance, you may have to pay an origination fee, ranging from 1% to 8% of the entire loan amount. And some lenders will charge a prepayment fee if you pay back your loan early.

How do I find the right personal loan for my situation?

If you want to take out a personal loan to improve your financial situation, the best thing to do is consider your options. Receiving quotes from a variety of lenders will help you find the lowest rates and most favorable terms.

The easiest way to do this is by using a lending marketplace like Credible. With Credible, you can get preapproved for a personal loan and receive offers from multiple lenders. 

To get started, you’ll outline how much you want to borrow and the loan purpose. Once you’ve chosen a loan company, you’ll complete your application and close on the loan. 

What are my other options?

If you aren’t sure if taking out a personal loan is the right choice for you, there are other options you can consider. If you’re having trouble paying your rent, the first place to start is talking to your landlord.

If you have a history of being a good tenant and paying your rent on time, they may be willing to work with you. You can also ask friends or family for financial assistance. 

Many Americans are struggling financially right now and are concerned about how they’ll be able to pay their rent. If you need a short-term cash infusion to cover rent payments, a personal loan is still your best option, thanks to the low rates and flexible repayment terms. 

You can explore your options by checking out Credible to compare rates and lenders today. 

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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