Should You Get a Moving Loan?

Rebecca Lake

Moving comes with expenses, and if you don't have the cash or don't want to drain your savings to cover them, a moving loan could foot the bill. This type of loan, also known as a relocation loan, can help you pay for a local or cross-country move. But before you borrow, you should know how these loans work.

What Is a Moving Loan?

"Moving loans are a type of personal loan that an individual could look into for financing a move," says Isaiah Goodman, chief financial advocate at Becoming Financial, a Minneapolis-based financial planning firm.

[Read: Best Personal Loans.]

Many lenders provide personal loans for moving expenses. Goodman says these are often unsecured loans, meaning they typically don't require collateral. Collateral is an asset, such as your home or car, the lender may need to secure your loan and seize if you fail to repay it.

Instead of asking for collateral, lenders review your credit, income and other factors to decide whether to approve a loan.

Moving loans can generally be used for a number of relocation expenses, including:

-- Hiring a moving company

-- Renting moving trucks

-- Paying for packing materials

-- Covering temporary housing and storage

-- Shipping

-- Getting moving insurance

-- Making security and rental deposits

-- Offsetting personal travel costs

-- Transporting pets

A moving loan can also help with living expenses while you settle into your new home or apartment.

Can You Get a Loan for Moving Expenses?

If you need a moving loan, you can find one with either brick-and-mortar or online lenders.

Traditional banks and credit unions can provide unsecured personal loans for various expenses, including moving costs. Online lenders can do the same. What distinguishes these lenders are their loan terms, specifically:

-- How much you can borrow

-- Interest rates and fees

-- Minimum credit score to qualify

-- How long you have to repay the loan

You can find personal loans ranging from $1,000 to $100,000, depending on the lender. Interest rates and fees can also vary greatly. Expect loan terms of two to five years, though some lenders may give you up to seven years to repay.

The minimum credit score you'll need to qualify depends on the lender. Some lenders accept borrowers with FICO credit scores as low as 600. You can also find moving loans for bad credit, but the lower your credit score, the higher your interest rate may be.

[Read: Best Bad Credit Loans.]

What Are the Advantages of Moving Loans?

If you're weighing the pros and cons, the positives of moving loans include:

-- Flexibility. Because relocation loans are personal loans, you can use them to cover almost any type of moving expense.

-- Speed. Getting your loan approved and funded can be quick, especially with an online lender. That's helpful if you have to move unexpectedly and need money fast.

-- No collateral. Not having to offer collateral for a moving loan is another plus if you don't have assets to pledge or you don't want a secured loan.

-- Low rates for qualified borrowers. Relocation loans can have interest rates similar to other types of unsecured personal loans. The better your credit, the better your odds of getting a lower rate.

What Are the Disadvantages of Moving Loans?

Here are a few reasons to think twice about using a loan to pay for your move:

-- Interest and fees. You'll pay interest on any loan, and if you don't have great credit, the interest rate could make your loan expensive. If your lender charges an origination fee or a prepayment penalty, that could add to the cost.

-- Continued payments. Consider the effect a moving loan might have on your finances. If you take out a loan, you could be paying for moving expenses for months, even years, after you've moved. Factoring estimated payments into your budget can help you decide whether a loan is a viable solution.

-- Credit risk. If there's a chance that you could fall behind on loan payments, then your credit score could suffer. Payment history is the most important factor in your FICO credit score, and even one late or missed payment could be damaging.

Should You Take Out a Personal Loan to Move?

Whether a moving loan is right for you depends on your needs, your move and your estimate of the move's cost. Cost is a key factor because the price tag can vary.

Taking out a personal loan for a few hundred dollars to pay for a move across town probably doesn't make sense. But if you're making a bigger move, such as a long-distance move to a larger home, you might need a moving loan.

If your move is sudden, you may not have enough cash to cover every expense. You might need a loan to bridge the gap.

"If your move is more on the unplanned side of things, a personal loan might be your only and best option," says Mike Glanz, founder and CEO of HireAHelper, a website that connects people with moving services.

Glanz says if you're considering a loan, shop around on moving costs. Try to get the most accurate quotes you can, which could involve in-home estimates, so you know how much you need to borrow.

Then, consider how that monthly payment fits into your post-move budget, and adjust your spending if necessary.

[Read: Best Mortgage Lenders.]

What Are Alternatives to Moving Loans?

If you don't want a personal loan or don't think you'll qualify, you can find other ways to pay for your move.

When you are relocating for work, your employer may reimburse you for some or all of your expenses as part of your benefits package. Just keep in mind that the IRS considers payment for moving expenses as taxable income.

Another way to cover the tab for moving: a credit card. You could even earn a few rewards with your card, especially if you get a new card with a sign-up bonus.

"Moving expenses are actually a good way to break in a new credit card that offers these types of returns," Glanz says. "The rewards could help offset some of the cost of moving. Plus, capturing all moving expenses on a single card can greatly simplify the accounting and budget-keeping part of the process."

But before you take the plunge and get a new credit card, review the annual fee, annual percentage rate, and other card costs and features. You may want a card with a 0% introductory APR to help you minimize the interest you might pay on your move.

Lastly, reevaluate your budget to see whether you can pay for your move out of pocket. If not, then assess your financing options to see which best suits your needs.