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Whether you plan to relocate across town or across the country, moving can be expensive. No matter how you choose to move your family and your belongings, you may not have enough cash in the bank to cover the costs after purchasing a home or putting money down on your new rental. A personal loan may be the answer you're looking for when it comes to covering your relocation costs.
Should You Use a Personal Loan to Pay for Moving and Relocation Expenses?
If you've already committed to relocating or absolutely must relocate and don't have the funds to complete the move, a personal loan could meet your financial needs. However, if you haven't committed to relocating yet, you may want to wait until you're in a better financial position or find an employer willing to pay for your relocation costs so you don't have to take out a loan for relocation expenses.
Personal loans are usually unsecured debt, which means you don't have to worry about your car getting repossessed or your home getting foreclosed on if you default on the loan. However, the unsecured nature of most personal loans means you'll usually pay a higher interest rate than with secured alternatives. Personal loan interest rates vary from 5% to 36%, but typically people with excellent credit can only get a personal loan with an interest rate of 10% to 12%.
Personal loans are usually repaid over a one- to seven-year period. When using a personal loan for relocation expenses, you'll likely want to stick with a shorter loan term to reduce the interest you pay on your relocation costs. If you have to stretch payments for relocation expenses over many years, you may want to either find a cheaper way to move or reconsider relocating.
It may make sense to take out a personal loan and pay interest on relocation expenses if you have a brighter financial future following the relocation. For instance, relocating for a job with a higher salary that could offset the costs of the personal loan may be a smart move. However, if you're relocating without an increase in salary or a decrease in cost of living, it may not make sense to use a personal loan and pay interest on your relocation costs.
Where to Get Moving or Relocation Loans
Finding a loan to pay for your moving and relocation costs shouldn't be very difficult if you meet lenders' financial and credit requirements. First, check with your bank or credit union to see what options they offer to cover your expenses. You may want to check with other banks or credit unions in your area to see if you can find better interest rates or terms elsewhere. Once you have an idea of the available loan options in your community, you should compare those quotes to online lenders, such as Earnest and SoFi, as well as peer-to-peer lenders, such as Prosper and LendingClub. After comparing both local and online options, you can decide which lender and loan product best fits your personal situation.
Alternative Methods to Consider
Whenever you decide to relocate, it's important to consider all funding options before you choose how to pay for your relocation expenses. While a personal loan may be your best option in some cases, other methods may result in lower interest costs or even free money from a current or future employer.
Employer-based relocation assistance: You may qualify for employer-based relocation assistance if you're moving because of a job. Usually, you'll have to negotiate relocation assistance funds along with your compensation package at a new company or when negotiating the terms of a promotion or transfer at your current company. Some employers require you to continue working at the company for a set time after relocation, or you'll have to repay the relocation assistance either in part or in full.
Save in advance: For voluntary relocations, it's often best to save up to pay for your relocation costs in cash because you won't have to pay interest like you would if you took out a loan. Gather estimates of how much it will cost to relocate your family, and factor this in with your other monthly bills and savings goals.
Credit cards: Credit cards are another way to finance moving or relocation costs. Some credit cards offer low interest rates that are competitive with personal loans if you have excellent credit. Alternatively, you could pay for your relocation costs with a credit card that offers a promotional 0% annual percentage rate (APR), which can last up to 18 months. Just make sure you pay off the balance in full before the promotional 0% APR period expires, or you could end up paying the typical higher interest rates associated with credit cards.