Moving loans: How to get help with moving costs

Moving is expensive and, sometimes, paying for it out of pocket may not be possible – especially if you’re moving on a short notice and haven’t had time to save up for the relocation or if you’re moving a large household across the country and the relocation costs are very high. And even if your move is not very big or very sudden, you may still not have enough savings to cover all relocation-related expenses – moving costs add up quickly and you may find yourself strapped for cash quite early in the relocation process.

Whatever the reason, you may need help with moving costs. That’s where relocation loans come in.

A relocation loan – or moving loan – is an unsecured personal loan meant to finance a house move. It’s flexible, fast, and affordable (the interest rates are usually low) and may be the perfect solution for those in need of financial relocation assistance.

So, if you’re facing a move, but are short on cash, you may want to consider getting a personal loan for moving. In order to decide if relocation loans are right for you, though, you need to know how they work, what benefits and risks they involve, and what alternatives you have.

Here it is all in a nutshell:

What is a relocation loan?

Relocation loans are personal loans that are used to cover moving expenses. They are unsecured (meaning they don’t require collateral (an asset, such as your home or car, the lender can seize if you fail to repay your loan)) and come with fixed interest rates and repayment terms.

Moving loans are paid back in installments or regular monthly payments, depending on the size of the loan (the amount that can be borrowed ranges from $1,000 to $50,000 and more).

When you take a moving loan, you can spend the money on all kinds of moving-related expenses – hiring a moving company, renting a moving truck, purchasing packing supplies, getting moving insurance, covering travel expenses, paying storage costs, making security deposits, etc. A moving loan can even help with living expenses during the first weeks after the relocation.

How do relocation loans work?

A relocation loan gives you a lump sum of money you can use to finance your move and make it safer, easier, and more efficient.

The application process is simple (see below for details) and, if your loan is approved, you get funding within days (sometimes, you may even be able to get your money on the same day you apply). 

You can pay your loan back over several years – loan terms typically range from two to five years, but some lenders may give you up to seven years to repay.

Interest rates and fees vary greatly depending on the lender, but they’re fixed, so your monthly payment amount remains the same throughout the entire payback period.  

Pros and cons of getting a loan to move out

Loans for moving expenses offer an easy way to finance a relocation but they’re not without drawbacks – you need to weigh the pros and cons of getting a personal loan for moving before applying for one.

Advantages of moving loans

The biggest benefit of taking a relocation loan is that it significantly eases the financial burden of moving – and at quite favorable terms too:

• Fixed interest rate and fixed monthly payments – As already mentioned above, loans for moving costs have fixed interest rates and the monthly payments stay constant for the life of the loan. The fixed payment schedule and the predictable repayment costs make budgeting easy and reduce the risk of falling into financial distress after the move. What’s more, you know exactly when you’ll be out of debt;
• Low interest rates for borrowers with good credit history – If you have a good credit score, you can get a much lower interest rate with a personal loan than with a credit card;
• No collateral -Unsecured loans don’t require collateral, so you won’t risk losing an asset to the lender, if you can’t pay back your moving loan;
• Flexibility – Lenders offer a wide range of loan amounts, so you can get exactly as much money as you need to pay for your move and get set up in your new home. And since relocation loans are personal loans, there are no restrictions to their usage – you can use them to cover any type of moving expense. The repayment terms are also very flexible (from 12 to 84 months), so you can choose a term that works for you;
• Fast funding – Loans for moving house are usually approved and funded very quickly – and that’s quite helpful if you have to move unexpectedly and need money fast. Most lenders will approve and fund a personal loan for moving within a week – and some will process a relocation loan application within one business day and will deposit money into your account within a day of loan approval.

Risks of taking out a personal loan for moving

There are always risks involved in taking on a debt:

• You’ll lose money on your move – When you take a loan to cover your moving costs, you’ll actually be paying interest on your moving costs. And on top of interest charges, you may have to pay various additional fees as well. Many lenders charge an origination fee to cover the costs of processing your application and distributing the funds. This fee is usually a percentage of your total loan amount (from 1% to 10%) and is either deducted from your loan or added on top of your balance. Another potential fee is a prepayment penalty which may be charged if you pay off your loan early. And there are substantial fees for missed payments, of course;
• The loan payments will put a strain on your post-relocation budget – When you take out a moving loan, you’ll be paying it off for years after you’ve moved – the continued payments will burden your budget and will pose a big challenge to your finances;
• There will be a credit risk – If you’re purchasing a home in your new location, having a loan may affect your mortgage approval. And if you fall behind on loan payments, your credit score may suffer – payment history is the most important factor in your FICO credit score, so even one late or missed payment could have quite a negative impact;
• You’ll add stress to your new life – Taking on a new debt as you’re beginning a new life in a new place will cause additional anxiety and stress during an already stressful period;
• You may have to pay high interest rates – If you have less-than-stellar credit or a lot of existing debt when you apply for a moving loan, you won’t get good terms – if you’re approved at all. (See below for details)

Now that you know how moving loans work and what the pros and cons of getting a relocation loan are, you can decide if taking a personal loan for moving is the right solution for you. And if it is, you need to find out how to get one.

How to get a personal loan for moving

Can you get a loan for moving expenses? Yes, you can – quite easily. Most banks, credit unions, and online lenders provide unsecured personal loans that can be used to cover moving costs.

The application process for relocation loans is the same as the application process for other personal loans – you need to fill out an application and provide financial documents such as pay stubs and bank statements.

1. Calculate your moving costs, estimate your savings, and decide how much money you need to borrow for your relocation – Personal loans come in a lump sum and it’s not easy to borrow more at a later stage, so make sure you know exactly how much your move will cost you and how much you need to borrow before you apply for a relocation loan. It’s best to fill out a moving quote form to get in touch with reputable movers in your area and see what they have to offer and then request in-home surveys from the companies you liked the most in order to get an accurate estimate of your moving costs (See also: How to get an accurate moving estimate);
2. Research lenders – Look for reputable, trustworthy lenders, compare their rates, fees, and conditions, and shortlist three or four lenders that seem to best suit your needs and your financial situation;
3. Pre-qualify – Pre-qualify with your selected lenders to see what loan amount, APR, and monthly payments you qualify for. Compare the offers and choose the best one for you;
4. Prepare the required documents (identification, social security number, W-2s, pay stubs, etc.);
5. Submit your application.

Since moving loans are unsecured, instead of asking for collateral, your prospective lenders will review your credit score and your income to decide whether to approve a loan. The minimum credit score you need to qualify depends on the lender, but getting a moving loan with bad credit can be difficult and may result in a higher interest rate.

Generally, the stronger your credit and the lower your debt-to-income ratio, the better chance you have to get a low rate on a moving loan.

Good to know: Can you get a moving loan with bad credit? 

You can find moving loans for bad credit, but you’ll have to pay a higher interest rate.

Loans for moving house are unsecured, so lenders take on more risk and, therefore, avoid borrowers with poor credit history. So, if you have a bad credit, it won’t be easy to get a loan and even if you do, the terms won’t be favorable to you.

If possible, you should try to improve your credit score before applying for a moving loan. If not, try to find someone with good credit to cosign your relocation loan.

Related: How to move with no money saved; How to move on a tight budget

Alternatives to moving loans

If you don’t want to take a personal loan or don’t think you’ll qualify, you can explore other options to fund your relocation:

• Use a credit card – Credit cards usually have higher interest rates than moving loans, but if you have good credit, you can qualify for a credit card with an introductory 0% APR period. With this card, you won’t be charged any interest if you pay off the balance within the promotional period (usually 12 to 18 months);
• Get a job relocation package – If you’re relocating for work, you can negotiate with your employer for moving assistance and may be able to get reimbursed for some or all of your moving expenses;
• Borrow from family or friends – If your relatives or friends can (and are willing to) lend you the money you need for your relocation, you won’t have to pay interest on the borrowed amount. Just make sure you pay your debt back in full and in a timely manner;
• Sell unneeded items – Relocating is the perfect time to declutter your home and get rid of everything you don’t need or don’t like anymore. Organize a garage sale or sell your unwanted items online to earn some cash for your move.

Needless to say, the best way to finance a move is to budget for it in advance and save up enough money to cover your relocation costs. Be sure to take advantage of every possible way to cut down your moving costs too. Good luck!