Should I consider a moving loan?

Woman laughing with her child, who is sitting in a moving boxImage: Woman laughing with her child, who is sitting in a moving box

In a Nutshell

If you need cash to cover the costs of relocating, you might consider a moving loan, which is basically a personal loan that can help pay for everything from your moving truck to the hotels you stay at along your route. But if the interest rate or other loan terms don’t make financial sense, look for better alternatives.

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Whether you’re moving across town or across the country, you might consider getting a moving loan to help with the extra expenses.

Moving isn’t cheap: The national average relocation cost is $1,313, and it’s typical to spend $720 to $1,941 on moving, according to HomeAdvisor.

If you’re moving around the corner, some good friends and a rented moving van might get you by. But if you’re going far, costs could run into the thousands. Taking out a personal loan for moving could help you make ends meet as you move to your new home.

To help you make a sound decision, let’s take a look at the potential costs and some alternatives to a personal loan for moving.



What is a moving loan?

Also known as a relocation loan, a moving loan is a personal loan used to cover relocation or moving expenses. A moving loan can be an unsecured personal loan, which means that it doesn’t require collateral. Instead, lenders decide whether to offer the loan based on several factors, including your credit.

You might consider using money from a moving loan to rent a moving truck, hire professional movers, buy packaging supplies, stay in hotels and get moving insurance. You could even use it to pay for move-in costs like your security deposit and first- and last-month’s rent.

The amount you can borrow can depend on the lender, as well as your credit, the state you live in and other factors.

Pros of a moving loan

  • Low interest rates — Personal loans often have better interest rates than credit cards, particularly if you have good credit history.
  • No collateral — Unsecured personal loans don’t require collateral to qualify. That means you won’t have to guarantee the loan with property, like your car or home.
  • Easier to budget — Personal loans are typically installment loans with a fixed monthly payment schedule. This makes your repayment costs more predictable, which simplifies budgeting to pay it off.
  • Varying loan terms — Personal loans come with repayment terms that usually range from 12 to 84 months. You may be able to choose a repayment term that makes sense for you.
  • Speedy application process — If you need money fast, some lenders can approve and fund a personal loan within about a week — or less — and deposit it directly into your bank account. Just remember to take the time to read the fine print — even if the loan process is quick.

Cons of a moving loan

  • Potentially high fees — Some lenders that offer personal loans might charge an origination fee, which covers the costs of processing your application and distributing the funds. This fee is typically a percentage of your total loan amount, ranging from about 1% to 8% or more. Another potential fee is a prepayment penalty, which is a fee if you’re charged if you pay off your loan early. Because paying off your loan early can save you in interest paid, you’ll want to steer clear of loans with prepayment penalty fees if you can.
  • More debt — If you already have substantial debt and you’re having trouble making monthly payments, it’s probably not the best idea to take on more.
  • High interest rates — If you opt for an unsecured personal loan, which doesn’t require collateral, know that they often come with a higher interest rate than secured loans do. A less-than-stellar credit history could also increase the rate you get.
  • Financial consequences if you miss payments — If you don’t pay back your loan as agreed upon, your credit could be negatively impacted by each payment you miss, and your loan could be referred to a debt collection agency.

Alternatives to a moving loan

If you’re on the fence or have decided a moving loan isn’t right for you, consider the following ideas.

Credit cards

The average American has two to three credit cards. If that applies to you, it may make sense to pay for relocation expenses with a form of credit that’s already open, as long as your credit limit can comfortably support some or part of those moving expenses.

But even if that’s not a deciding factor for you, you also could consider applying for a credit card with an introductory 0% APR. As long as you pay off the charges according to the terms of the introductory offer and before the intro period is over, you shouldn’t have to pay interest on the amount you charge.

On the flip side, if your credit is a little rough, you might have trouble qualifying for a credit card with a low-APR intro offer.

Employer relocation package

If you’re moving for a new job, ask your new employer if they’re willing to help with the costs of relocating. You may need to negotiate for relocation assistance to be part of your compensation package.

Some relocation packages cover one part of moving, like the moving truck. Others might include costs to help you sell your current home. You might be given a lump sum upfront or be reimbursed after the move. Heads-up though: Depending on your new employer and location, you may be on the hook to pay back any moving costs your company reimbursed you if you stop working for the company within a certain period of time.

Budgeting

If you don’t have to move right away, you could wait a little longer to save up money.

First, add up all your estimated moving expenses. Next, divide that total by the number of weeks or months until your ideal move date. For instance, if you plan on moving in six months, and anticipate needing $5,000 for your move, that’s $834 a month, or $208 a week.

Then go over your spending habits in detail, and look for any ways to cut back. You can also use a budget worksheet, like the one from the Consumer Financial Protection Bureau, to track your income and how much you spend each month.

To save even more, consider moving on a weekday, dining out less while you save or selling unwanted belongings before you relocate. You could even start a side hustle job to earn more money.

Peer-to-peer lenders

Peer-to-peer lending can help you to borrow directly from individual lenders who fund small loans, bypassing traditional financial institutions.

The investor can choose to fund part of a loan or multiple loans. A borrower can receive funds from multiple individual investors.

P2P loans can come with fees and possibly high interest rates if your credit isn’t strong — which may make them more expensive than traditional forms of lending.


Bottom line

Moving can be stressful — even more so if you’re struggling with costs of relocation.

If there’s no way to pay for your move out of pocket and you think you need a moving loan, consider all of your financing options, including smaller personal loans, credit cards or updating your budget in anticipation of the move. Look closely at the interest rates, fees and other terms, and do the math for each scenario. Once you do, you can better decide on the best solution for your situation and budget.


About the author: Jackie Lam is an L.A.-based money writer who is passionate about helping creatives with their finances and cultivating community among entrepreneurs. Her clients include Fortune 500 comp… Read more.