Personal Loans For Rent And Deposits
Renting an apartment can be cheaper than buying a home. Which typically requires a large down payment of at least 20% plus additional closing costs. However, just because renting is a more affordable option when compared directly to buying a home, does not mean that it is an affordable endeavor. Aside from rent and utilities, renters will also need to be cognizant of other costs. Like several months rent, deposits, moving fees, storage fees, and deposits for utilities and services. If you do not have the income to make rent, then you can eight be priced out from your dream apartment. Or you could consider taking a Personal Loan to Pay Rent.
Personal loan to pay rent can help. Especially when it comes to the initial deposit and costs of moving. Compared to other types of financial products, personal loans tend to have favorable terms and conditions. It means with a very low APR when compared to credit cards and hard money loan.
A Word of caution About Personal Loans To Pay Rent
It is important to remember that a personal loan to pay rent is not free money. — this is money that you need to pay back in monthly installments. Depending on the provider, the loan will have fixed or variable rates. With a fixed rate, you will be paying the same monthly installments for the life of the loan. It is easy to budget into your family plan since you will know what to expect from a month to month basis. Alternatively, you might also bump into personal loans that have variable rates in your research. Variable means that the interest rate can change on a whim. Even though the interest rates are volatile, they tend to be a bit lower than a fixed rate. Typically your personal loan to pay rent will have a fixed interest rate.
Regardless of the type of personal loan, it can be expensive to onboard. The ideal candidate for a personal loan to pay rent who is renting is a person who would need assistance with the initial stages of moving. They need extra discretionary income to absorb these costs. Other than the initial costs, they have the means to afford rent and utilities.
Another ideal candidate for a personal loan is someone who needs to absorb the cost of an emergency. For example, while most landlords are required to take care of structural issues or if there is some sort of electrical malfunction. Then you may need to relocate for a couple of days, or purchase additional equipment to replace broken or damaged ones. A personal loan, while not directly used for rent, can be used to accommodate for some of the financial pitfalls of associated with renting.
Need Help Paying Rent? Benefits of a Personal Loan
Personal loan to pay rent, emergency help with rent, and security deposits. Moving in itself is expensive. There might be a temporary cash shortage. Borrowed money in the form of a personal loan can bridge that gap. People who need emergency funds borrow money after all other forms of assistance have been exhausted. Here are some of the unique benefit of a personal loan. Plus, how Loanry helps with the research to find a lender.
Helps you with the security deposit.
Are you applying for an apartment or a home for rent? Then it’s important to know that you are most likely battling against other renters who want the same space. To improve your application for an apartment, you might want to include several months worth of deposit. Which will put you ahead of other renters who are just paying for first month’s deposit.
Not only that, while a security deposit is required for most apartments and homes for rent, they can be a huge challenge. Especially for a tenant who might be able to comfortably accommodate rent but do not have the additional cash in hand to pay for the deposits. Once your personal loan to pay rent is approved, the funds are disbursed and the borrower can spend the money as they desire — typically it’s going to be for the cost of moving.
Favorable rates and the potential to borrow a higher limit than credit cards.
Most lenders who establish personal loans realize that most people who are applying for them need much higher limits than a credit card may offer. For example, according to the Consumer Financial Protection Bureau, the average credit limit was between 10,000 and $6500 for prime borrowers and about $1200 for subprime borrowers. This may not be enough, especially if your credit history is not pristine. Where you do not have the income to be categorized as a super prime borrower. The limits on credit cards are sometimes too low to absorb the high cost of moving. Even if you’re able to accommodate the cost of moving with a traditional credit card, then you will most likely go beyond 30% utilization limit. Causing your credit score to take a dip.
Personal loans tend to be a lot more generous when it comes to the credit limit. Not only that, but personal loans also have favorable terms. Those usually being below 15%. The typical credit card has an APR interest rate tacked onto it that is usually north of 18%. This translates to at least several hundred dollars in savings during the life of the loan. Not so say thousand. Keep in mind that just like a credit card, institutions that issue personal loans look at different things. Among which: your debt to income, ratio frequency of on-time payment, employment history and your credit score.
There is no collateral
Obtaining a personal loan to pay rent is relatively straightforward — you apply with personal loan issuer with a traditional bank or credit union. The bank that you are already partnered with may also be more accommodating to current customers if you want to purchase a secondary financial product like a personal loan. This makes the process of obtaining and processing a personal loan easy and straightforward — with most people securing their funds within days.
Since personal loans are an unsecured loan, there is no collateral required on your part. The consequences of defaulting on your personal loan are still severe. But there’s a peace of mind knowing that you will not be losing your home, vehicle, or any other asset.
Unlike a credit card, budgeting a personal loan is very straightforward, especially if it has a fixed rate. Before the personal loan is given to you, you will be presented with additional information like the terms of the personal loan, APR, and interest-rate. There will also be a predictable repayment schedule, that way you won’t be surprised with any additional fees or fees during the life of the personal loan. Once approved, you know how much you to repay each month, how many months it will take to repay the loan in full, and the total interest costs accrued.
Refinancing other debts may help with your renter’s profile.
When you apply for an apartment, your credit history will be scrutinized. A personal loan can help refinance all your debts into one payment. This will be looked upon preferably versus the debt tacked to all of your current credit cards. You may also find that by consolidating your credit card debts with a personal loan, your credit score will improve. This will only help your renters profile when applying for accommodation.
Before You Get a Loan
Before you apply for a personal loan to pay rent, put yourself in the position of the personal loan issuer. These identities have departments that will scour your history. You can do that by checking your credit report. By law, you are entitled to one free copy of your credit report from the three credit bureaus — Trans Union, Experian, and Equifax. When you get a copy of your credit report, fix any mistakes and discrepancies.
Can it affect your score?
Take a close look and check for any mistakes that could negatively affect your score. You want to put a spotlight on debt that you have already paid off but is still being reported to the credit bureaus, information that is not yours due to a creditor confusing you with someone else in your family with a similar address or name, information that is associated with you which may stem from identity theft, and information from your spouse or former spouse that shouldn’t be there. Even if you have older accounts that have been discharged, you may want to contact old debts and ask them to have it removed from your credit report.
Called “pay to delete”, this is where you settle an old debt, as long as the collection agency deletes it from your credit history. You may also want to ensure that old debts are verified — if they aren’t able to verify it, then it can be legally erased from your credit report. Doing these things will clean up your credit report. This translates to old debts dropping off or being deleted. This streamlines your credit file and will remove incredulous debt.
The “Pay to Delete” method
After you get a hold of your credit report and notice that all the debts that are dragging your score, then you might be able to go with a payment agreement. The pay to delete method can be used to delete this old piece of information. By offering to pay the delinquent debt in full – or for less if you know how to negotiate – then the collection agency will erase the record off of your credit. It’s not common practice, but it is a legitimate form of deleting old debts. About 10% of collection agencies will agree to pay to delete agreement. While this is a relatively low number, it still doesn’t hurt to try.
You are most likely to have success with smaller stores or smaller collection agencies if the debt has been sold to a small settlement company. If you have debt from credit cards or other major institutions then realize that you might not be able to ask for this sort of agreement and you will be required to pay off the debt or have it linger on your credit report until it falls off by itself within seven years.
Lower your debt to income ratio
A personal loan is still a financial product, and they’re going to scrutinize your income, income sources, and credit history before they enact a loan or conjure up the terms and conditions. A debt to income ratio compares the amount of debt you currently have, with your overall income. The institution that is going to issue your personal loan likes to see a relatively low debt to income ratio. This shows that you are responsible with money that you generate and that you aren’t leaning into financial products for financial help — the money that you generate is enough for you to rely on. Divided the total reoccurring monthly debts by your monthly income. This number is expressed as a percentage, with the lenders liking to see a 36 percentile or lower.
Having a partner with better financial health? Take advantage!
Some companies allow personal loans that can be applied to with a cosigner. If your partner has a great credit history and solid income — and they are presumably also going to be living with you in your new apartment — then you will be able to secure a loan with higher limits and more favorable terms and conditions. Before you try to use a cosigner, make sure that they understand the responsibilities that come with cosigning. Your partner is equally responsible for paying the loan off. The personal loan will appear on your credit report, and also your partner’s. As long as your partner understands this contract and make it a priority to ensure that monthly payments are on time, then a cosigner can help you save money on your rent in the form of a lower interest rate for your personal loan to pay rent.
Does your personal loan have origination fees? These are fees that are tacked onto your personal loan and are allocated for processing. The origination fee will be deducted from the loan amount. Be aware of these fees, since they can lower your personal loan and can adversely affect the ability to pay rent or deposits.
Should You Use a Loan To Pay Rent?
Now that you know how personal loans work, what creditors are looking for, and how to secure a personal loan with a favorable rate, it’s important that you use a personal loan responsibly. Working to get the most out of your loan comes way before the loan hit your bank account. It takes purposeful planning, commitment, and smart finance manage. Most personal loans have a repayment window of one to three years — that’s a lot of time to repay the loan. That’s also a lot of time for something to go wrong. It’s important to prepare for those rainy days where you might struggle to repay your loan.
Do not try to use personal loans for frivolous things like vacations or lavish wedding. Once you find out that you can get a personal loan, some start to imagine vacations in exotic beaches. And some might have dreams of lavish weddings — which is, unfortunately, a common pitfall when taking a personal loan. While these experiences are important, the best advice is to do so when you have the extra money, and not rely on an institution for life events.
What about additional payments?
When you shop for a personal loan to pay rent, make sure that the issuer enables you to make additional payments without penalizing you. Some personal loans will require that you pay monthly payments — no less and no more of these monthly installments. This is to ensure that you repay your loan on time — and that the creditor is able to reap interest revenue from you. You want to work with a personal loan that gives you the leeway of making additional payments whenever you have the discretionary income. Once you get your loan and pay off rent and moving fees, you will be able to tackle your personal loan more aggressively.
As long as you have shown that you are financially responsible and are ready to onboard an additional financial product into your budget, then a personal loan can be the go-to solution when moving or when you want to be able to accommodate several months worth of rent deposits.
About the Author – Kaiser C
Ethan founded OfferEDGE in Dec 2013 with the mission to unify the financial quadrants through a system that allows businesses to be seen when consumers use a Single Sign On across Lending, Credit, Money and Real Estate. Taub invents the offers and IP, while overseeing all aspects of the company. He also has orchestrated the company’s earned media across the brands Loanry®, Cashry®, Debtry®, Budgetry®, Billry®, Taxry® and more. This includes over 500 publications that have been featured across the web.