If you’re closing on a new home or preparing to relocate to another state, then you may be wondering what you should expect to pay in moving expenses. The costs of a standard move can add up quickly, whether you hire movers or rent your own moving truck and enlist your friends for help. And let’s not forget packing costs, too.
The price tag can reach even higher when you’re relocating to another state, which means you’re responsible for things like fuel costs, airfare, food, lodging, and more.
The high cost of relocating is probably one reason why Americans are moving less frequently than they did years ago. However, there are ways to ease the financial strain a move can cause. One option is a relocation or moving loan.
In this guide:
- What is a Relocation Loan?
- Best Moving Loan Options
- Benefits of Using a Moving Loan
- Risks of Using a Moving Loan
- Alternatives to Using Relocation Loans
What is a Relocation Loan?
Simply put, relocation loans are used to cover moving expenses. There are several types of relocation loans available, and they differ depending on the bank or financial institution offering them.
For example, some relocation loans are intended to help you close on a new home or pay for a security deposit on a new apartment. The only catch is that the start date for your new job — if that’s your reason for moving and applying for the loan — must be before your first loan payment is due.
For many banks, a moving loan is essentially an unsecured personal loan used for moving expenses. As long as you have a good credit score and stable income, chances are you can qualify for a personal loan to cover the costs of your move.
If your credit report has a few blemishes, you may still be able to qualify for an unsecured personal loan, although you’re likely to face higher interest rates as a result.
>> Read More: What Credit Score is Needed for a Personal Loan?
No matter what route you take, a relocation loan can help ease some of the financial stress that comes with a move. The loan terms, rates, and conditions can vary widely, so it’s a good idea to look into several different lenders before signing on the dotted line.
Best Moving Loan Options
If you’re interested in taking out a moving loan, here are four lenders — three of which have no fees, including no prepayment penalty — you can consider:
Earnest offers fixed-rate loans to cover moving expenses. Annual percentage rates start at 6.99% based on financial history, with loan amounts ranging from $5,000 to $75,000. The application process is simple, and you’ll usually receive the loan proceeds in your bank account within a week.
Marcus by Goldman Sachs offers interest rates starting at 5.99% APR on personal loans of anywhere from $3,500 to $40,000. You will need good credit to qualify for the lowest rates, but once you’re approved, you’ll typically receive the funds within two days.
LightStream provides personal loans from $5,000 to $100,000 with rates starting at 3.99% APR. A 0.50% APR discount applies when you enroll in autopay. LightStream processes loan approvals very quickly, so you could receive the funds the same business day.
With each of the above examples, you’ll need to have good or excellent credit to qualify. But if you have a less-solid credit history, the loan programs available with peer-to-peer lending company Peerform might be a good option for you. Peerform offers personal loans for bad credit, with loan amounts between $4,000 and $35,000 at rates from 5.99% to 29.99%. You’ll typically receive the funds in about a week.
Peerform does charge a late fee, which can range anywhere from 1% to 5% of the total loan amount.
The Benefits of Using a Moving Loan
According to the American Moving and Storage Association, the average cost of an intrastate move is $2,300. To relocate to another state, the average cost is $4,300. If you don’t have this kind of money on hand, a relocation loan could help you out.
The biggest benefit of taking out a relocation loan is that it can ease some of the financial burdens associated with moving. For example, it may enable you to hire movers instead of having to do it all yourself. It could also help you cover relocating costs that aren’t covered by a new employer. You’ll also benefit from fixed monthly payments for the life of the loan, and some lenders offer interest rate discounts with autopay.
Taking out a relocation loan is usually a better idea that financing your move on using credit cards, which often have much higher interest rates and less flexible repayment terms than personal loans.
The Risks of Using a Moving Loan
Anytime you take on new debt, there are risks involved. Taking out a moving loan means you are taking on additional debt as you’re trying to establish yourself in a new location, which can cause added anxiety during an already stressful time.
Your relocation loan could cause your debt-to-income ratio to be higher than some lenders would like. This could cause problems if you’re trying to take out a mortgage on a new home. If a lender does a hard credit pull right away — versus doing a soft inquiry to pre-qualify you — and you don’t end up getting approved, you’ve added another ding to your credit for no reason.
If you’re moving to a new city, the cost of living expenses could be higher than what you’re used to. If you find that your budget is stretched too thin, this could make it difficult to maintain timely payments on your relocation loan.
Alternatives to Using Relocation Loans
If you aren’t sure about taking out a relocation loan, there are other options available. For example, you could finance the move on a credit card with a 0% introductory APR offer for a fixed period of time.
So long as you’re able to pay off the balance in full before the term limit is up, you can avoid incurring interest charges — and, if it’s a rewards credit card, you could even end up earning some cash back.
If you don’t want to take out a loan through a bank, you could see if your moving company offers financing options. Just make sure you understand the terms and conditions so you aren’t caught off-guard down the road.
There are advantages and disadvantages to taking out a moving loan. You’ll have to decide whether it’s the best choice for you based on your personal situation and your own financial means.
Take the time to estimate your moving costs, expected income, and cost of living in your new location. This should help you determine whether a relocation loan is right for you. If you decide to take one out, be sure to evaluate your personal loan offers so you can find an interest rate and monthly payment that works with your budget.
Author: Jamie Johnson
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