Should I consider a loan for rent payments?

Realizing that you won’t have enough money to make your rent payment can be a scary feeling.

You first might want to check with your landlord to see if you can get some extra time to make your payment. If you don’t have that luxury, there may be other options.

Let’s take a look at some options, including taking out a personal loan. We’ll look at the pros and cons of rent loans and show you what to consider before deciding what to do.

• How can I get help paying rent?
• When is getting a loan to pay rent a good idea?
• When is getting a loan to pay rent a bad idea?

How can I get help paying rent?

If you’re worried you won’t be able to make rent, you may want to take a hard look at your budget. Here are some questions to start with.

• Can you eliminate or delay some expenses to free up cash?
• Could you pick up a side gig?
• Would adding a roommate help cut your rent?

If none of those options works for you, you may need emergency cash now. If so, here are a few options that could get you extra cash to pay rent.

Unsecured personal loans

Taking out an unsecured personal loan is one way to get extra cash and doesn’t require collateral. An unsecured personal loan is a type of installment loan, which means you borrow a fixed amount of money and pay it back with interest in monthly installments over the life of the loan.

Because you’re not putting up any collateral, the amount you’re able to borrow and the interest rates you may qualify for depend primarily on your credit. When assessing your credit, lenders will typically consider a number of factors — including income, credit scores and debt-to-income ratio — to determine whether you qualify for an unsecured loan.

If the lender considers you a risky borrower, you may be denied a loan or charged a higher interest rate. If you don’t qualify for an unsecured personal loan, you may want to consider applying for a secured loan.

Secured personal loans

With a secured personal loan, you’ll need to put down some sort of collateral — such as a valuable piece of property like a car. Secured loans may have lower interest rates than unsecured loans. If you have bad credit, it may also be easier to qualify for a secured loan.

But keep in mind that with a secured personal loan your collateral will be at risk. If you aren’t able to repay the loan as agreed and default on the loan, you could lose your car or whatever you used to guarantee the loan. You’ll want to weigh the pros and cons carefully before choosing a secured personal loan.

Credit cards

Does your landlord or rental company allow you to pay your rent with a credit card?

If so, this could be a good course of action if you’re able to pay off your statement balance — on time and in full — before the due date in order to avoid interest charges. Your credit card’s annual percentage rate could be lower than the APR of some short-term loans. And the overall costs could be lower than some other options — even if you need to carry a balance for a month or two. Just make sure to check whether your rental company charges a fee to pay rent with a credit card.

If your rental company doesn’t allow credit card payments, you could consider using a bill-payment service like Plastiq, which helps customers pay virtually any bill. Keep in mind that Plastiq charges a fee of 2.5% of the transaction total.

You may also consider taking a cash advance on your credit card. Cash advances can get money into your hands quickly but can also be expensive. With a cash advance, you’ll start accruing interest on the money as soon as you take it out. Your credit card company is likely to charge a higher interest rate for cash advances than it does for normal purchases, plus a processing fee.

Payday loan

Payday loans are typically short-term, high-cost loans for $500 or less.

Payday loans are notorious for high fees and difficult repayment terms. The fees on a typical payday loan can hit an equivalent APR of around 400%, according to the Consumer Financial Protection Bureau. Try to avoid payday loans if at all possible.

Payday alternative loans

If you can’t qualify for an unsecured loan, don’t assume that you need to settle for an expensive payday loan.

You may be able to qualify for a payday alternative loan, which is a short-term, small-dollar loan offered by some federal credit unions.

Payday alternative loans range from $200 to $1,000. Repayment terms can range from one to six months and come with a 28% interest-rate cap (though interest rates may change). While 28% isn’t necessarily a low APR, it pales in comparison to the extremely high cost of payday loans, with 400% APR–equivalent fees (or even higher!).

The downside to payday alternative loans is that they can be more difficult to qualify for. And they’re available only to qualifying members of the federal credit unions that offer them.

It’s worth noting that credit unions offer potentially lower interest rates on loans generally, along with other benefits for members — so you may want to consider joining a credit union as part of a longer-term strategy.

When is getting a loan to pay rent a good idea?

In general, taking out a loan to pay for rent should be a last resort. But if you’re in a temporary bind and can pay the loan back quickly, it may be worth considering.

If you’re in the middle of a job change, for example, a loan may be able to help you cover one or two months’ worth of rent until you get your first paycheck. A loan for rent could also help you cover costs on a new place until you get your security deposit back from your former landlord.

Ideally, you’d be able to cover these short-term costs with an emergency fund. But if not, a loan could help you get the cash you need.

When is getting a loan to pay rent a bad idea?

If you won’t be able to pay a rent loan back quickly, you may be better off considering other options. This is especially true if you choose a payday loan, which can be costly.

Because of their high fees, payday loans can lead to debt traps, according to the CFPB, which says nearly a quarter of initial payday loans are re-borrowed nine times or more.

Alternatives to rent loans

Need emergency money for rent but don’t think a rent loan is right for you? Here are a few other options to consider.

• Government programs: You may want to look into the Housing Choice Voucher Program (Section 8) to see if you qualify for rent assistance. Also, the HUD Resource Center and the HUD state directory are two good places to search for available assistance.
• Charitable organizations: There are several charities — including the Salvation Army, Catholic Charities and Modest Needs — that offer housing assistance.
• Family and friends: Reaching out to family and friends for help with a financial emergency could help you steer clear of predatory lenders.

What’s next?

If you’re thinking about taking out a personal loan for rent, be sure to do your research.

Compare lenders on things like interest rates, APRs, fees, and fees hidden in the loan terms. Check for state licenses and read reviews to get an idea about whether the lender you’re considering appears trustworthy.

Finally, if you’re looking for unbiased advice on whether a rent loan is right for you, consider setting up an appointment with a credit counselor. A credit counseling agency can help you manage debt and get your finances under control.

*Approval Odds are not a guarantee of approval. Credit Karma determines Approval Odds by comparing your credit profile to other Credit Karma members who were approved for the personal loan, or whether you meet certain criteria determined by the lender. Of course, there’s no such thing as a sure thing, but knowing your Approval Odds may help you narrow down your choices. For example, you may not be approved because you don’t meet the lender’s “ability to pay standard” after they verify your income and employment; or, you already have the maximum number of accounts with that specific lender.