Is it a Smart Idea to Get a Personal Loan for Relocation Costs?

These loans are very popular right now, but is borrowing the right move to help you relocate?

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Updated May 13, 2024
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You can use money from a personal loan for just about anything: home projects, consolidating debt, medical bills, wedding expenses, and yes, even relocation. In 2018, 32 million Americans moved from one home to another and more than half either hired movers or rented a truck for transporting their possessions.

Add to that packing supplies, security deposits/down payments, cost of travel, real estate fees, new furniture, and other expenses, and the cost of moving can become as much of a burden as the actual moving. If you’re facing substantial relocation expenses, you may consider taking out a personal loan. But what do you need to know about how to get a loan? Here is what’s involved with getting a personal loan for relocation and what you need to know before making the decision.

In this article

How do personal loans work?

When you take out a personal loan, you are borrowing money from a lender at a specific interest rate and agreeing to pay it back over a set amount of time. Most personal loans are unsecured, meaning you don’t have to provide anything of value that could be collected if you default on the loan. You can also use your loan to pay for lots of different things, which is one reason why personal loans are the fastest-growing type of debt in the country right now.

Personal loans are installment loans, as they are paid back monthly over the course of several years, typically 1- to 5-year terms. You will pay the same amount each month and your balance will steadily go down until it’s paid off completely.

Interest rates

The interest on the best personal loans is usually much lower than what is offered by revolving credit lines, such as a credit card. This is because the APR (annual percentage rate) is often much lower, and simple interest is calculated on installment loans. The current average APR for a personal loan is between 10% and 28%. The average interest rate for a credit card is around 17%.

To calculate the interest on a personal loan, you multiply the APR by the total amount borrowed and add that amount into the loan. Then divide by the length of the repayment term to find your monthly payment. For example, if you took out a loan for $1,000 with an APR of 10% to be paid back over 2 years, your repayment terms would look like this:

Total interest for the loan: 1000 x .10 = 100

Total loan balance: 1000 + 100 = $1,100

Monthly payment: 1100 / 24 = $45.83

With revolving credit, interest is compounded daily or monthly, which adds to the total amount you owe every month. Your monthly payment is applied mostly to the interest you have accrued during the billing period, while as little as 1% of the rest goes toward the balance. This results in monthly payments that vary and a much longer timeframe for paying off charges.

How to borrow

You can usually find personal loans from anywhere between $500 and $100,000 from traditional and online banks, credit unions, and peer-to-peer lenders. Online marketplaces and lenders are becoming more common and making the application process easier for consumers. With a marketplace, such as Monevo and LendingClub, you can input your information and receive offers from several lenders. Direct online lenders, such as Best Egg and SoFi, allow you to complete an online application and receive a quick decision, terms, and transfer of money.

Personal loans often come with origination fees that can be between 1% and 6% of the amount you’re borrowing. These are usually added to the balance of your loan, increasing the amount you’re financing. How much you will pay can depend on your credit score and income.

6 things to know about using a personal loan to cover relocation costs

Now that you have a good idea of what’s involved with taking out a personal loan, let’s take a closer look at how this may — or may not — make sense if you’re looking to pay for relocation.

1. Relatively quick and easy way to get money

Depending on which lender you are borrowing from, you could get the funds from your loan as soon as the next business day after filing your application and getting your approval. More likely, it will take a few days or a week, but, overall, payouts from personal loans are generally quick. This can be helpful if you have to relocate on short notice, such as for a work transfer or family emergency.

2. Flexible loan terms

Most lenders offer several options for how long you can take to pay off your loan. They will often have lower interest rates attached to shorter loan terms, but ask for larger monthly payments. Longer terms typically carry smaller payments with higher APRs. Having these options can help you better manage your monthly expenses and control how long you will be in debt as a result of your move.

3. Fixed repayments make it easier to budget

When you have a predictable monthly payment, making and sticking to a budget is much easier. Instead of spreading out payments of varying sizes across multiple credit cards to cover moving expenses and spending many years paying off the balances, you can have one payment you make monthly for a much shorter time period. You can then budget around this amount.

4. APRs can be lower than other types of borrowing (such as credit cards) — but can be pricey if you have less-than-perfect credit

As mentioned above, APRs for personal loans can be substantially lower than for other types of borrowing. However, your credit score plays a big part in how good of a rate you can get. Higher scores usually result in low APR offers. If you have a fair or poor credit score, rates could be at the far end of or substantially higher than the average of 10% to 28%. You’ll have to weigh whether paying the amount of interest offered with a personal loan is worth it for your relocation plans.

5. Additional fees

There are two main types of fees to be on the look-out for with personal loans. The first is origination fees, which is usually a percentage of your loan amount and is meant to cover administrative expenses of setting up your loan. You will have to decide if adding this amount makes sense in the scope of your relocation.

The second is a pre-payment fee or penalty. Lenders usually want to get as much interest out of a loan as possible and paying off a loan early can interfere with that, especially if you have a variable interest rate. Make sure to read the terms of your loan carefully to see if you will be charged a fee or penalty for pre-paying your loan.

6. You’re adding to your debt

Taking out a personal loan when you’re about to relocate can help you cover some large expenses, but it also adds to your overall debt. If you’re moving due to economic circumstances, increasing your debt may not be a good financial move. You’ll be paying for this short-term problem for the next few years and adding to your monthly budget. If you will be able to comfortably cover the monthly loan payment, then taking the loan may be a good option.

4 alternatives to personal loans for relocation

If you’re thinking that a personal loan for relocation may not be right for you, there are some other things you can do to help pay for your move.

1. Use rewards credit cards strategically

Some credit cards can be helpful for reducing the cost of relocation expenses. Getting a card with 0% APR for 12 or 18 months gives you room to make charges and pay them off over time without interest. You could budget out a static monthly payment to ensure the balance is paid before the introductory period is over.

You can also use a rewards card to reduce your relocation expenses. You could use points earned with a travel card, such as the American Express® Gold Card or Chase Sapphire Preferred® Card, to pay for trips, lodging, and vehicle rentals in the area you want to move to while you’re scouting out places to live. Many cash back cards, like the Discover it® Cash Back or Capital One Quicksilver Cash Rewards Credit Card, have introductory bonuses and give you a percentage of every purchase back. This can lower your expenses.

2. Pick up a side hustle to earn some extra income

The side gig industry is booming for a reason. More and more people are picking up part-time work to help pay for expenses and save money. If you have some time to plan and save for your relocation, try a side hustle and bank the extra income for your moving expenses.

3. Ask a family member or friend for a loan

Yes, it may be difficult or awkward, but asking a friend or family member for a loan may be an option to explore if you’re having trouble paying for your relocation. Chances are, they won’t charge you interest, which means that every dollar you pay back goes toward reducing the amount you owe. Offer to draw up and sign a contract with set repayment terms to help reassure them and keep yourself on track for paying back the loan.

4. If you’re moving for a new job, ask your new employer about relocation packages

Moving for a new job is a common reason for relocation and comes with significant expenses. Many employers provide some kind of reimbursement or expense package to make moving easier for new talent. Ask your new employer about what they offer and see if it meets your needs. You may find that they can only pay for some of your costs, but some is much better than none.

The final word on using a personal loan to cover relocation costs

Only you can decide if taking out a personal loan to cover relocation costs is right for your situation. It can provide a quick solution with easy repayment options that fit nicely into your budget. A new loan also adds to your overall debt and adds to your monthly budget for the next few years. Carefully weigh the costs and the benefits before making any choices, and be sure to shop around for offers that work for you.

AmONE Personal Loans Benefits

  • Loans up to $50,000
  • Min. Credit Score: 600
  • APR: 3.99%-35.99% (as of May 31, 2023)
  • No Collateral Needed

Author Details

Robin Kavanagh

Robin is a freelance writer who lives on the South Carolina beach. She has spent the last 20 years writing about all kinds of topics for publications such as The New York Times, Yes! Magazine, Next Tribe, Parenting, and various trade magazines. On, you’ll find her mostly writing about smart ways to use credit cards, navigating personal loans, how to save when traveling, and ways to improve your financial health.