Can you pay rent with a loan?
Millions of people have seen their incomes decline during the coronavirus pandemic. If you are one of them, you might find it difficult to cover your bills, especially your rent, as this is probably one of your biggest monthly expenses. In fact, you may be thinking about borrowing money to cover your rent payments. The good news is that a personal loan allows you to borrow money for any purpose. As such, if you take one out, you can use that money to cover your rent and any other bills you might have trouble with. But before you apply for a personal loan, there might be a better solution to your financial problems.
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Reach out and ask for help
A personal loan won’t hurt your credit score in the same way as credit card debt, as long as you make your monthly payments on time. But a personal loan will will cost you money in interest, even if you manage to get a reasonable rate on the amount you borrow. Additionally, there are closing costs associated with taking out a personal loan, and these vary from lender to lender. You may however be charged up to 8% of your loan amount. So, for example, if you are borrowing $ 8,000, you might consider a fee of $ 640.
Because there are downsides to taking out a personal loan, before you apply for one to pay off your rent, it helps to talk to your landlord about the difficulties you are facing and ask for some leeway. If you’re still working to a certain extent – say, your hours have been cut back – you might only be able to afford $ 700 a month instead of the $ 1,200 you normally pay. If so, ask if your landlord will accept full payment of $ 700 until your working hours increase. Or, ask to pay $ 700 per month now, then make up for the missing $ 500 per month once your situation improves. There are a number of arrangements that your landlord can agree to, so it’s worth having this conversation.
Another option is to see if you qualify for pandemic relief on other bills, which could free up more money to cover your rent. Your utility provider, for example, might allow you to defer payments for a period of time, as might your car loan manager, and that wiggle room could pay your rent in full.
One thing to keep in mind is that while your landlord may want to to work with you while you have financial hardship, they may also depend on your rent payments to cover their own mortgage. While some rental units are owned by huge management companies, many landlords are family owners who live on rental income and cannot afford that.
How to find the right loan
If your landlord is unwilling or unable to work with you on rent and you’ve exhausted other relief options, you may want to apply for a personal loan to meet your housing payments. But before you go out and apply for a standard personal loan, consider a coronavirus hardship loan instead. These loans differ from ordinary personal loans in several ways.
More specifically, hardship loans:
- Are often smaller, ranging from $ 500 to $ 5,000, while regular personal loans may have a higher minimum loan requirement than you want
- Tendency to offer more competitive interest rates
- Usually have more flexible payment terms
- Are designed for people who can prove they lost income during the pandemic (while a stable income increases your chances of getting approved for a personal loan)
If you can’t qualify for a coronavirus hardship loan, a regular personal loan is certainly a reasonable choice, but it might be beneficial to apply for the first one first, especially if you don’t need to borrow that much. For example, if your working hours were recently reduced at work but your manager expects you to return to a full-time schedule by April, you might only need help for three month’s rent. In this case, a difficult loan might be better suited depending on the amount you need to borrow and the better terms you will get on your loan itself.
When you take out a personal loan, you can use that money for any purpose. Hell, you could take out a personal loan to buy a TV, go on vacation, or buy clothes (although borrowing for these purposes is not recommended). As such, it is more than possible to borrow money to meet your rent. Just be sure to explore your relief options before you have to add to your debt. Even coronavirus hardship loans charge interest (and some may charge closing costs, some may not). And while you won’t be paying as much as you would for a regular personal loan, when you’re having financial difficulty, it’s best to avoid all the extra fees you can.