Any time of the year, relocating could be vital to your goals. Maybe you’re considering a move for work, education, residency, or relationships. Assuming you’re not offered funding to move, a relocation loan can help you get the job done.
Moving costs can add up to thousands of dollars. Not everyone has the necessary savings set aside. But there are workarounds. Some lenders offer lower interest rates than a credit card would. Let’s take a look at what they’re offering today.
It’s a Personal Loan.
A moving loan, a.k.a relocation loan, is simply a personal loan you take out to cover your moving costs. Like credit card debt, a personal loan is an unsecured loan. (This differentiates it from a mortgage or reverse mortgage — in which the lender records a lien on your home.) But in contrast to credit card debt, a personal loan is a lump-sum payment to you.
You may use the funds you get from an unsecured loan for any reason. That includes renting a moving van, hiring a professional moving team, buying new furnishings, and so forth.
With a moving loan, the borrower typically repays the funds plus interest over several years. So it’s essential that the borrower carefully plans out the repayment before going forward, and prepares to make timely repayments.
Making on-time payments can boost a borrower’s credit profile. Plus, it averts late fees.
Personal Loan Terms Could Beat Credit Card Borrowing.
Companies frequently change their offerings. At the time of this writing, Discover is offering personal loans for amounts up to $40,000, without charging origination or other fees, as long as the borrower makes on-time repayments. The fixed interest rate makes planning straightforward.
Many more lenders advertise personal loans, too — including relocation loans. These companies have earned positive writeups in recent articles by both Forbes.com and NerdWallet:
- LightStream
- SoFi
- Universal Credit
- Upgrade
- Upstart
When loan shopping, look at interest rates — and other terms too. For example, some of these companies will help you refinance their loans later on, and others won’t.
Pre-qualify: There’s no hard pull — but no commitment from the lender, either — if you’re shopping for a loan and simply want to get pre-qualified. At this stage, you’ll see what interest rate and total amount you can get. Because there’s no hard pull when getting pre-qualified, comparing the terms from several companies is doable without taking a credit score hit.
Not All Moving Loans Are Created Equal.
Is your credit profile in good shape? Or do you need to work on your credit repair techniques?
Ask yourself this question, because it’s your credit profile that really dictates whether you’re approved for a personal loan, and on what terms.
☛ As a general rule, an introductory zero-interest loan for somewhere between a year and 21 months is a good choice for a moving loan.
Watch for origination fees. They could be anywhere from 1% to 10% of what you borrow! So be sure to ask. These fees could be reflected in the annual percentage rate you pay.
Speaking of rates, look out, too, for loans with variable rather than fixed interest rates.
Sallie Mae® offers loans specifically for relocation. Targeting people who are going off to college or medical residencies, they offer borrowers up to $30,000. And they offer a choice of fixed or variable rates. Caution! Interest on loans with variable rates can go up unpredictably. This can hit borrowers with student loans especially hard.
What else might you want to seek out when you’re shopping for a relocation loan? Be sure the loan you’re applying for (taking a little credit score hit with that hard pull) gives you enough funding to get through the move.
Also, you might want to look at how quickly the loan money will be available to you. Some companies extend funding within one business day after approval. You’ll need to submit your ID, tax documents, and pay stubs or other proof of regular income. The faster you’re ready with the documents, the faster your loan can be issued.
What Are the Alternatives?
Some people, of course, rely on their savings for an interest-free way to pay for a move. This depends on being ready well in advance for the move, though. If you’re considering moving loans, you probably aren’t sitting on a load of cash.
What if you aren’t cash-rich and you don’t have private sources to borrow from? You could examine a few other alternatives to a personal loan.
There’s always the good, old-fashioned credit card. You’ll want to compare interest rates for the potential loan and the credit card when making a decision. Assuming your credit profile is in decent shape, you could likely open a credit card with a zero-interest introductory rate.
There are local and federal credit unions. As a general matter, they cap their interest rates at 18%. If you are a longtime member of a credit union, the loan underwriter might be more likely to approve you even if your FICO® Score is not quite up to snuff. People with credit scores under 630, or who have a lot of current debt, might face very high rates for personal loans from traditional banks. It’s not unheard-of to see them jack rates up above 30%. (The industry frowns on anything in the high 30s and above.)
Not just credit unions, but also online lenders that use artificial intelligence, can help responsible borrowers get better rates. So, your credit score does not have the final word on your finances.
Another funding method in the day of Facebook markets and the like? Selling possessions you won’t need in your new surroundings. Lightening your load makes moving less pricey, too.
Responsible Borrowing Is an Art.
We hope this brief intro to moving loans helps orient our readers to these products. For some people, they’re the best way to deal with the cost of a move.
It’s important to be careful, of course, when considering any form of long-term borrowing. The repayment terms for moving loans can span 60 months or more. Look for the shortest terms available with manageable payment amounts.
Keep in mind that you usually don’t have to be a borrower for the full term of the loan. Most lenders accept overpayments or early payoffs. So if you can repay the loan ahead of schedule in one of these ways, you’ll avoid having to pay the full interest on the loan.
Very best wishes in your new place!
Important disclaimers: Deeds.com is not a financial adviser. Speak to your own financial expert for case-specific guidance. We don’t have affiliate marketing relationships with the companies noted in this piece. They don’t pay us, and they didn’t influence our commentary.
Supporting References
Experian Blog via Experian.com: Ask Experian – What Is the Best Term Length for a Personal Loan?
Sallie Mae® Bank via SallieMae.com: Sallie Mae® Medical Residency and Relocation Loan.
Rebecca Safier for ForbesAdvisor via Forbes.com: Best Moving and Relocation Loans of 2023.
Annie Millerbernd and Jackie Veling for NerdWallet™ via NerdWallet.com: BEST OF – Personal Loans for Moving and Relocation in 2023 (updated Dec. 21, 2022).
And as linked.
Photo credits: cottonbro studio and Artem Podrez, via Pexels.