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How to Take a Personal Loan to Rent an Apartment in the U.S.
Moving into a new apartment is always expensive, especially considering that rents have increased from 2021 to 2022 by 14.07%.
In addition to higher rents and the costs of moving to a new apartment, many landlords require a security deposit, the first month’s rent, and sometimes even the last month’s rent.
This can be tricky to manage and wondering how you’ll afford your decision or manage your cash flow can cause a lot of stress. Let us show you how you can work your way around this by getting personal loans for apartment rent.
Can You Get a Loan for Apartment Rent?
Yes, you can get a loan to pay the security deposit or rent for your apartment.
Essentially you’ll be applying for a personal loan and using the money to help float your rent and other costs until you’re able to pay it off.
The great thing is, a personal loan is usually an unsecured loan so you won’t need to provide an asset as collateral and security to the lender.
It’s important to remember that loans come with interest. This rate determines the extra amount you have to pay back on top of the amount you borrowed.
Before taking out a personal loan for rent, you should calculate how much it will cost you in total based on the amount borrowed, interest rate, and repayment term. Be sure you can afford the monthly payments or you may find yourself falling into more debt.
Consumer vs Commercial Loans
If you are looking for loans for your rental property, skip to the “Commercial Loan Options” section below.
How to Get a Personal Loan for Rent in the U.S.
There are a variety of lenders that offer loans that you can use for rent and other moving expenses. These include online lenders as well as more-traditional banks.
Let’s take a look at how to get personal loans for apartment rent:
1. Research & Compare Apartment Loan Lenders
Assuming you’ve already decided that you want to take out a personal loan to pay rent and can afford repayment, the first step is to research and compare lenders.
Using your credit score is a good way to narrow down your search right off the bat. Different lenders offer loans for different credit score bands, so searching for “good credit personal loans” or “fair credit personal loans”, for example, can help you find lenders that you’re likely eligible for.
Other things to consider when comparing lenders include:
- Interest rates – The lower the rate the better. Make sure to also see if it’s a fixed or variable interest rate.
- Repayment terms – These are often also called “term lengths.” These determine how long you will repay the loan for.
- Fees – Such as application, origination, late payment, and prepayment fees. Loans with no fees or low fees are the best.
- Secured vs unsecured – Secured loans require collateral in case you do not repay your loan. Unsecured loans do not.
2. Apply for a Loan
Most lenders and banks now let you apply online for a loan.
This cuts out a lot of the frustrations of paperwork and branch visits that usually come with loan applications. After applying, you will typically get feedback within 24 hours.
These are the basic criteria that lenders look at when you apply for a loan for apartment rent:
- Credit score & credit history
- Income and Current employment
- Financial behavior
- Defaults, collections, or bankruptcies
If you are not a U.S. Citizen and have recently moved on a visa, you may be able to apply for a loan for apartment rent if you have one of the following visas:
- F-1 – International Students
- OPT – Optional Practical Training
- O-1 – Extraordinary Ability
- L-1 Intracompany Transfer
- TN – NAFTA Professionals
- J-1 Cultural Exchange
- DACA – Childhood Arrivals
3. Receive your Offer
If you’re eligible for a loan, you’ll receive an offer with a promissory note to sign. The funds will be transferred to you once the signed note is received.
Please note it may take 2 to 3 business days or longer for the money to reflect in your account. But after that, you’ll be able to utilize your loan and pay your apartment rent.
4. Start Repaying Your Loan
Then it’s as simple as repaying your loan.
We recommend setting up automatic payments online so you don’t have to worry about forgetting them each month. With autopay, your monthly repayment will automatically be deducted from your bank account.
So go get that apartment and own your new job!
5 Best Loans for Renting an Apartment
If you’re planning to take a loan to rent an apartment, you’ll want to make sure you borrow with a reputable lender. Below, you’ll find our picks for the best lenders for apartment rental loans, which include:
- AmOne (Best for Good Credit)
- Spring Loans (Best for Bad Credit or No Credit)
- First Premier Lending (Best for Bad Credit)
- Upgrade (Best for Quick Disbursement)
- Avant (Best for Good to Great Credit)
1. AmOne (Best for Good Credit)
AmOne provides a straightforward loan matching service for those seeking personal loans to cover apartment rental costs. They efficiently connect borrowers with the right lenders based on individual financial needs.
2. Spring Loans (Best for Bad Credit)
Spring Loans offers a range of personal loan options for potential renters. They focus on flexibility, meeting the diverse financial needs of both short-term renters and those planning for longer stays.
3. First Premier Lending (Best for Bad Credit)
First Premier Lending specializes in offering customized loan solutions for those in need of funds for apartment rentals. They provide a variety of loan choices tailored to individual financial situations.
4. Upgrade Personal Loans (Best for Quick Disbursement)
Personal loans from Upgrade may be used at the borrowers discretion to pay for anything including apartment rentals. If you’re approved, the loan amount can range from $1,000 to $50,000 with various terms available. After acceptance, the loan amount can be deposited directly into your bank account, usually within a day.
5. Avant (Best for Good to Great Credit)
BestEgg offers personal loans that can be used to cover the expenses associated with apartment rentals. With a simple application process, they aim to provide fast and efficient funding options for potential renters.
Commercial Loan Options
If you’re looking for loans for your rental unit or a portfolio of rental apartments, you should consider the loan options below:
1. Bank Balance Sheet Apartment Loans
Also known as portfolio loans, these provide greater flexibility in terms such as debt to income and loan to value ratios but may have higher interest rates and fees. They are suitable for “absentee owners” and process more quickly than government-backed loans. CoreVest is a recommended choice for such financing.
2. Government-Backed Apartment Loans
These loans, backed by entities like Fannie Mae, Freddie Mac, or the FHA, offer low-interest rates but adhere to stricter regulations, such as local ownership restrictions. They can provide up to $6 million for a term of 35 years but may take longer to process. Remember to check specifics like minimum occupancy requirement and the loan’s assumability. A trusted provider is the Commercial Real Estate Finance Company of America (CREFCOA).
Benefits of Taking a Loan for Apartment Rent
Reduces the Financial Burden of Moving
Relocating is stressful. Not only do you have to pack up your whole life and adapt to a new environment, but there are always a lot of costs involved. Even worse, many times, it’s costs that you did not expect or plan for.
If you take out loans for apartment rent, you don’t have to worry about working those costs into your monthly budget. You also don’t have to worry if your paycheck only pays in after your first rent is due. Your loans for apartment rent will help you absorb the cash flow timing.
Just be sure that you can afford the monthly payments that come with your loan.
Helps Build Credit
Generally, paying your rent each month won’t build your credit score. You’ll need to make use of rent reporting services to do that.
But, if you get loans for apartment rent and repay them faithfully, it will build your credit score. Having a good credit score makes a lot of things easier when you go to get more loans in the future such as auto loans or a mortgage.
If you’re not a U.S. resident, making payments on an apartment loan here will help you build a credit history and help in securing future forms of credit in America. As it can generally be challenging for visa holders to build a proper credit score in the U.S., securing loans for apartment rent can be a great way to start building your credit score.
Downsides of Taking Out a Loan for Rent
Have to Repay Your Rent Loan with Interest
Like almost all types of loans, you’ll have to repay your apartment rent loan with interest which means you’ll end up paying back more than you took out.
How much you’ll have to pay in interest determines how big of a downside it is—which leads us to our next point.
Can Be Expensive Depending on Your Rate
While a loan with a rate under 10% won’t burn too much of a hole in your wallet, some personal loans have rates that are anywhere from 2x to 20x that.
Be sure to avoid payday loans and other loans with extraordinarily high interest rates. These can be nearly impossible to repay and can lead to a debt spiral that can be hard to get out of.
Before signing the promissory note on any loan, be sure to use a loan calculator to see what your monthly payments will be and how much interest you’ll pay over the life of the loan.
Can Damage Your Credit Score if You Miss Payments
If you miss payments on your loan for rent, your credit score can be negatively affected since lenders report missed payments to the credit bureaus.
Having a poor credit score or a history of missed payments can make it harder to get a loan in the future.
If you do take out a loan to pay rent, just be sure to make your payments! Most lenders allow you to set up automatic payments which is always helpful in making sure you don’t miss any.
5 Tips for Finding an Apartment Quickly
It can be tough to find a new apartment—especially if you’re moving to a new city or country.
Here are some tips on how to find an apartment that fits your budget and needs quickly:
1. Set a Realistic Budget
You have to remember that your cash flow might be difficult for the first few months as you’ll probably be required to make lots of once-off purchases at the start. Most people need to buy furniture and decorate from scratch.
So, set up a proper budget and make sure you’ll have enough cash on hand after you’ve paid your first and last months’ rent to deal with the unexpected costs that come with moving.
2. Check Roommate Listings
Renting an apartment with roommates can be a great idea. Generally, shared apartments are cheaper per person when compared to other apartments such as bachelor apartments. There are helpful services you can use that connect people looking for a roommate and people in need of an apartment.
3. Reach Out
Make a move. Put some feet to your search efforts. Contact people and agents for apartments that you are interested in renting. An apartment is not going to come to you. You’ll need to go find your best option. Also, climb into the network you’ve built so far and ask your colleagues at your new job if they know about places opening up.
4. Work with a Professional
Making use of professional help is no shame, it can actually be a great idea. People who know the area you are interested in will give you great advice on where to look and what to expect. They’ll be able to point you in the right direction. Even though you’ll probably have to pay a small fee for their services, this may save you lots of time, and maybe even money, in the long run.
5. Stay Organized
Find an efficient and productive way to keep track of your different options. Make pros and cons lists that can help you to eliminate the apartments you want to avoid. It will also help your budgeting efforts. If you do this, you’ll be able to keep proper track of your prospective apartments’ rent and possible utility bills and weigh your options much easier.
Happy Apartment Hunting
Moving into your new apartment on your new life journey shouldn’t be a burden. Sure, it comes with a lot of stress, but you’ll be able to take care of at least the financial stress by taking out a loan for apartment rent. This exciting new season of your life awaits. Don’t take the unnecessary stress with you. Get a loan for apartment rent today!