Skip links

Is Taking a Personal Loan to Pay Rent a Good Idea?

Should I get a personal loan to pay my rent? You may borrow money for rent, but it’s not cheap. Check alternatives first to paying your rent.

If your income drops, for example through a job loss, your rent payment might be the most difficult to handle since it is often your biggest expenditure.

Personal loans are a costly method to pay rent, and there are other options like local assistance that should be explored first.

Your last choice when it comes to paying your rent should be a personal loan.

Taking out a loan to pay your rent should be avoided if you don’t feel confident you can return the money in a short period.

We’ve compiled the most thorough answer to whether you can pay your rent with a personal loan.

Why Do People Take Personal Loans For Rent?

The most important thing to consider before taking a personal loan to cover rent is how quickly the debt will be repaid.

Taking a loan may make sense if you need a short-term financial lifeline and you’re confident you’ll have the cash to repay it.

I believe that if you want to take out a personal loan, you must be realistic about the amount of debt you will be taking on
Sarah Hamilton, certified financial planner

For example, perhaps you’re changing jobs and will have a period without pay.

You might be in between rentals and require assistance paying your new home’s security deposit while you wait for your previous landlord to return your previous security deposit.

Both of these situations are certain to allow you to repay the debt.

Pros And Cons of Paying Rent With a Personal Loan


1. Can Help you Negotiate Your Rent

A flexible landlord may provide a discount on the rent rate to you if you utilize a personal loan to pay the first few months of your rent in advance or the total lease.

If you don’t have enough funds to pay the rent, a personal loan might be able to assist you to save money over time by providing you with some financial breathing room.

2. Helps You Build Your Credit History

A loan may help you establish your credit history.

A personal loan can help raise your credit score if you have an existing credit history.

However, if you make your loan payments on time each month, you will only enhance your credit score.

A positive credit rating might also assist you in obtaining a mortgage in the future.

To get a decent interest rate, you’ll need a good credit score and track record.

People with good or excellent credit (690 or higher FICO) can only qualify for low-interest loans.

3. Assures Financial Stability

If you’re not sure whether your income is enough to live on your own, use a personal loan as a safety net and keep the money in savings.

A little cushion might provide you the confidence to leave sooner.

4. Personal Loans Have High Borrowing Ranges

Personal loans are available in a variety of amounts, usually ranging from $500 to $50,000.

You should borrow only as much as you need, even if you qualify for a large sum.

You may use your emergency funds to pay for rent for an additional period, such as 6 months or 12 months.

For example, suppose you’re renting a one-bedroom studio for $900 per month with utilities included.

If you discover an online lender that provides a large borrowing limit, you might apply for $10,800 to cover your housing costs for a whole year.

5. Comparison Shopping that is Fast and Simple

It’s never been easier to compare interest rates today.

Research maximum loan amounts and interest rates offered by different lenders before applying for a loan.

It’s possible to get a better rate and save money on interest by doing this.

6. A Secured Loan Makes It Simpler to Be Approved

Unsecured personal loans are popular since they don’t need collateral.

However, you will find it more difficult to qualify for a secured loan when your credit score isn’t the greatest.

Remember that the collateral must correspond to the loan’s amount.

If you take out a personal loan of $7,000 to pay your rent and fail to repay it, you must put up something that can be converted into cash as security.

If your credit history is bad, you may be required to put up as collateral a vehicle that has a value of at least $7,000. If you use a car as collateral, the lender might keep the title until you repay the loan.


1. You’re Putting Yourself In a Financial Bind

You must make both your monthly rent payment as well as a repayment on the new loan every month.

A personal loan saddles you with debt, which is not the same as purchasing a home since an apartment isn’t considered an asset.

Each mortgage payment contributes to the accumulation of equity in your property.

You don’t improve your net worth by taking on debt to pay your rent.

Rent is paid for an infinite amount of time, unlike a mortgage, which ends when you sell the property or die.

2. You’ll Be Charged Interest on the Loan

Because interest is charged on personal loans, the amount you repay will be greater than your monthly rent.

Short-term loans with hefty interest rates abound, and if you have to pay back for a year or two instead of several months, you’ll end up paying an equal amount of interest.

A $10,000 personal loan with a 27% APR and 24-month term would cost about $3,700 in total interest for someone with a poor credit score (300 to 629 on the FICO scale).

3.You Could Be Undervaluing Your Financial Needs

If you’ve never lived on your own, you may mistake your monthly expenditures for those of a single person and borrow less than is required.

Unanticipated expenses might put you in a tight financial position, leaving you with no money.

For example, you may anticipate needing $900 per month for the rest of the year and only borrowing $1 over that period.

If you spend an extra $150 each month as a result of your error, you’ll spend more than you planned throughout the year, forcing you to find additional money.

4. It’s More Difficult to Get a Loan When You Have No Credit

Even if you have no credit, you may be accepted for a secured personal loan.

Your application may be rejected if you don’t make enough money or if the lender insists on a cosigner.

A co-signer is someone who guarantees that you will repay the loan if you default on it.

When Should You Take Out a Personal Loan to Cover Rent?

Borrowing money to pay for rent should be the last option.

However, if you are in a tight spot and can repay the loan promptly, it may be worth your while.

A loan may be able to assist you in covering 1 or 2 months’ worth of rent until your first check arrives if you’re going through a job change.

A loan for rent might also help you pay off the costs of a new house while your old landlord returns your security deposit.

If you don’t have an emergency fund, you can still cover these immediate expenditures by using a loan to get the cash.

When Shouldn’t You Take Out a Personal Loan to Cover Rent?

If you can’t pay off a rent loan on time, there are alternatives available to you.

If you choose a payday loan, you are putting your financial security in jeopardy.

This is especially true if you borrow money for an emergency expenditure or other urgent need.

The CFPB warns that payday loans may be debt traps because of their high interest rates.

Almost a fifth of initial payday loans is re-borrowed nine times or more.

Alternatives To Help Paying Rent

There may be other options for obtaining cash to pay your rent:

Consider how you might increase your income to close the gap. You may sell old business apparel or provide online tutoring as an alternative.

If you borrow money from friends or a family member, you may be able to obtain better terms than other lenders, but they won’t know unless you ask.

If you’ve been paying on time in the past, your landlord may be willing to assist you. This might include waived late charges, an installment plan, or delaying payment for a month.

If your apartment lease allows you to sublet your place, talk to your landlord about them. Moving in with a friend or relative for a short time while you sublet your home might help you cover the gap.

They can connect you with local social services, such as charities and religious organizations, that may assist you with housing needs.

Frequently Asked Questions

  1. Should You Take Out a Personal Loan to Pay Your Rent?

    If you no longer have access to your old landlord's security deposit, a loan for rent might assist you in covering the fees of a new property until your former landlord returns it.

    You should be able to cover these short-term expenses with an emergency fund. However, if you don't have one, a loan could assist you in obtaining the money you require.

  2. Are there any alternatives to paying the rent with a personal loan?

    Yes, there are some good alternatives you should consider like:
    Contact your landlord.
    Supplement your income with a new revenue stream.
    Move to a new location.
    Call 211 211 for information about local social services, such as charities and religious organizations, that may assist you with housing assistance.