When I decided to move from Pennsylvania to Florida to escape the snow, I created a moving budget. Even though I intended to handle most of the move myself, including packing and driving the truck, I was shocked to discover that it would cost over $10,000. That was far more than I expected, so I started exploring using personal loans for moving expenses.
Although I had an emergency fund, I was hesitant to touch that money in case I needed it for a crisis. Instead, I took out a loan. That turned out to be the right choice for me, but it isn’t for everyone. Here’s what to consider before you apply for a loan.
Calculating your moving costs
The biggest mistake I made was underestimating some of my expenses. Before you decide whether to use a personal loan for your moving costs, make sure you account for all the expenses you’ll face, which could include:
- Hiring movers
- Renting a truck
- Buying moving supplies
- Transferring your vehicle
- Paying for storage and lodging
- Renting a new apartment
4 times using personal loans for moving expenses is smart
With all the moving expenses you’ll face, taking out a personal loan can help you cover costs. Doing so can be a good idea in the following situations.
1. You’re moving for a job with a higher salary
If you’re moving for a new job and it offers a higher salary, you’re more likely to be able to afford your payments.
A major hotel in Orlando offered my husband a job in its culinary department. Since I was freelancing at the time, the move didn’t affect my income, but it did boost his salary. That change made it easier to pay off the debt quickly.
2. You can comfortably afford the payments
If you’re just starting out, you might be on a shoestring budget each month. If that’s the case, a personal loan could stretch your resources too thin.
Ideally, you should be able to easily afford your payments. When I estimated my personal loan costs, I made sure the payments were well within our budget and that we had breathing room in case of any emergencies.
3. You don’t have other obligations
My husband and I agreed that we’d move only if we got rid of our other debt, such as our credit card balance and student loans. We wanted our personal loan to be our only debt so we wouldn’t be overburdened or raise our debt-to-income ratio too much.
If you don’t have other forms of debt or have only small balances, you’ll be able to manage your payments more easily and get out of debt sooner.
4. You have a plan to pay it off
When you apply for a loan, it’s important to have a plan to pay it off. Otherwise, taking out more debt can exacerbate your current issues.
For my husband and me, our plan involved cutting our expenses and earning extra money with side hustles. All the additional income we earned went directly to our personal loan balance, which helped us pay it off two years ahead of schedule.
Downsides of personal loans
Although a personal loan was a lifesaver for me, it’s important to carefully consider your options. There are some downsides you should keep in mind.
Low-interest personal loan lenders exist, but they reserve their lowest rates for people with excellent credit and stable incomes. If your credit score isn’t great, lenders might offer you only high-interest loans. In fact, you could get hit with an interest rate as high as 35.00%.
A high-interest loan can add thousands to the cost of your loan. For example, if you took out a five-year, $10,000 loan and qualified for a 35.00% interest rate, you’d repay a total of $21,294. You’d pay double what you originally borrowed because of the interest rate.
Applying for a personal loan
If you’re planning to move, make sure you’re prepared for all the associated costs. If you need to borrow money to pay for it, compare offers from multiple personal loan lenders to ensure you get the best deal. Shopping around can make using personal loans for moving expenses a smarter choice.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|