Sometimes life happens, and you may realize you’re short on rent. Rent is one of the most important bills to pay, and failing to raise enough money can be stressful as, in some cases, it can lead to eviction.
So, to bridge the rent gap, you may resort to short-term borrowing by taking out a personal loan. But is this really a good idea?
If you are debating whether or not to take a personal loan to pay rent, you’re in the right place. In this article, we’ll look at whether taking a personal loan to pay rent is a good option and the various alternatives available. So, let’s dive in!
Is It Possible to Take a Personal Loan to Pay Rent?
Yes, you can take a personal loan to cover your remaining balance. A personal loan comes as a quick option to clear your rent, but it can be expensive in the long run. Therefore, if you have other ways to clear your rent, a personal loan should be your last option.
Before applying for a personal loan to pay your rent, you need to weigh the risks and benefits as discussed below.
A Personal Loan for Rent Is an Expensive Option
Although a personal loan comes as a quick fix whenever you’re running short, it can be an expensive undertaking that may cost you a fortune in the long run. Here’s an outline of how a personal loan can be costly:
1) A Personal Loan Adds Debt
By taking a personal loan, you’ll be committing to monthly payments to service it. Therefore, a personal loan adds debt, as you’ll have to pay your rent as well as the loan installment payments.
2) A Personal Loan Bears Interest
Many personal loans have high interest rates, and you may find that at the end of the repayment term, you have paid as much interest as you’d have paid for a couple of months’ rent.
The interest rates become increasingly high if you have a bad credit score. High interest rates combined with a long repayment period, mainly between 36-60 months, translates into much of your hard-earned money going into interest charges.
3) Personal Loans Have High Qualifying Demands
To qualify for a personal loan with favorable interest rates, you need an excellent credit score and a good credit history. Typically, if you have a low credit score or your credit history is poor, lenders will offer you a loan at high rates, making it expensive in the long run.
4) A Personal Loan Can Affect Your Credit Score
One of the primary factors that determine your credit score and credit history is your ability to make loan repayments on time. So, missing your personal loan repayment in just a single month can have a huge impact on your credit score. It can lower your credit score by up to 100 points.
Why Some People Take Loans for Rent Assistance
Despite being regarded as an expensive option to use for rent payment, a good number of people still take personal loans for rent assistance. Here’s why:
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- You can take a personal loan to pay rent if you’re certain you’ll soon have money to pay it off. For instance, when taking up a new job or waiting for some funds to be deposited into your account.
- Using a personal loan to pay rent can also make sense if you want to negotiate your rent. For example, you can use a loan to pay rent for a few months in advance or pay your entire lease in advance. If you do this, a flexible landlord can offer a significant discount on your rent.
- Another reason why you might take a personal loan to pay rent is to build your credit score. However, this will only be possible if you make your payments on time each month. Building your credit score may qualify you for higher mortgage loans at favorable terms in the future.
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Personal Loans for Excellent Credit
If you have an excellent credit score, you can qualify for personal loans at favorable terms. Some of the personal loans for excellent credit include:
Lightstream Personal Loans
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- Lightstream is a popular lender offering loans at an estimated annual percentage rate (APR) of 2.49-19.99% with autopay.
- A minimum credit score of 660
- Loan amount ranges between $5,000 – $100,000
- Loan term 2-7 years
- No origination fees
- No option to pre-qualify on the website
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Marcus by Goldman Sachs Personal Loans
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- Estimated APR 6.99-19.99%
- Loan amount $3,500 – $40,000
- A minimum credit score of 660
- Loan term 3-6 years
- No fees
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SoFi Personal Loans
SoFi is another popular lender for good and excellent credit borrowers.
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- Estimated APR 4.99-19.63% with autopay
- Minimum credit score 680
- Loan amount $5,000 – $100,000
- Loan term 2-7 years
- No fees
- Three days approval time which is longer than what most lenders offer
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Mass Mutual Personal Loans
Massmutual federal credit union is another lender offering excellent credit borrowers personal loans for their various personal needs.
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- Estimated APR as low as 9.75%
- Flexible loan term of up to 5 years
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Other Options for Help With Rent
Besides taking a personal loan to pay rent, here are other options you can use:
1) Have Supplemental Income
Supplemental income means extra income to bridge any financial gap that may arise. So, you could consider having side hustles besides your regular job.
2) Talk to Your Landlord
Don’t be afraid to inform your landlord of your financial hiccups. If you have a history of making timely rent payments, your landlord may give you a listening ear and offer you some financial assistance. Such assistance may come in the form of an installment payment plan or waived lateness fees.
Either way, such assistance will go a long way in helping out with your rent.
3) Change Your Living Situation
You can consult with your landlord on the issue of subletting, and if they allow for it, you can move in with a family member or friend during the subletting period. Subletting allows you to cover your rent gap without taking huge loans.
4) Ask For Help From Family and Friends
You can also ask for short-term loans from family and friends to cater to your financial gap. In most cases, such loans come with lower rates and more flexible terms than personal loans, especially if you have a low credit score.
Frequently Asked Questions
Here are some frequently asked questions concerning taking personal loans to pay rent:
Can I Get a 532 Credit Score Loan?
Typically, you need a credit score of at least 550-580 to qualify for most personal loans. So, with a credit score of 532, it’ll be hard to qualify for a personal loan because most lenders see you as a high-risk borrower.
However, you can still qualify for bad credit loans, most of which have very high- interest rates, and you may only qualify for a low loan amount.
Can I Get a 581 Credit Score Personal Loan?
A credit score of 581 falls under a fair credit score. And while most lenders will approve of your loan with a 581 rating, it might still attract higher interests.
Can I Get a Personal Loan for 2500 Salary?
With a salary of $2500, you may need to convince lenders that you have other sources of income. A low salary makes you appear like a high-risk borrower, disqualifying you from loans with favorable terms.
Can I Take Out Payday Loans for Rent?
Payday loans are a common option for people who need quick funds to pay expenses like rent before their next paycheck. While payday loans may be faster and easier to get than personal loans, they have higher interest rates and shorter repayment terms. So be cautious if you are considering payday loans for rent.
As discussed above, it is possible to use personal loans for rent. However, doing so can come with some long-term consequences, costing you even more money in the long term. It’s important to weigh the pros and cons and, if possible, avoid payday loans entirely.
Featured Image: Megapixl
