Should You Take Out a Moving Loan ?

When it comes to purchasing or selling a home in Omaha all parties involved in a home sale transaction will need to pay a significant cost that many people often forget about. That is the cost of moving your belongings from one home to another. Moving can become very expensive depending upon the method you use and the distance you need to move your things. In some cases, it can cost up to $10,000. For this reason, some people have decided to take out a moving loan.

What is a moving loan?

With the additional cost of moving after a home sale transaction, many people who have a large amount of stuff to move or a large distance to travel may consider taking out a loan to help them pay for the cost of getting their stuff from point A to point B. A moving loan is simply money lent to cover the cost of moving expenses. This can include renting a truck or hiring help as well as paying for supplies and even the cost of temporary housing or storage while finding a new place to live or waiting to get into your next home.

Sometimes a moving loan is named a relocation loan because moving a long distance requires a larger amount of moving expenses. It may seem crazy to take out a loan to cover the cost of moving your things but an upside to the loan is it can help improve your credit score by giving you added credit history.

A moving loan is considered a type of personal loan and it is often paid out in a lump sum that you as the borrower are able to spend on almost anything you see fit. The loan is expected to be paid back with a contractual agreed-upon payment schedule.

Benefits of using a moving loan

The interest rates are better

Some people with enough room on a credit card might wonder why not just use their credit card to cover the costs instead of taking on a new loan. The average interest rates for moving loans are often much better than credit card interest rates which are some of the highest rates you will pay. In some cases a credit card has twice the interest rate as a personal loan to cover moving expenses.

No collateral

In most moving loan scenarios a borrower is not required to offer any collateral as a condition for approval. Assets you hold such as your vehicle, your home, and the cash in your savings account can serve as collateral to help qualify for a loan but these are not needed with a personal loan for moving.

Flexible terms

Moving loans have the possibility of coming with more flexible terms of repayment. You may find a personal loan anywhere from $3000-$100,000 with repayment plans of anywhere between 12 months and seven years that offer a fixed interest rate. 

Drawbacks of a moving loan

Fees

Borrowing money always comes at a cost and when you take out a loan to help cover moving expenses it will cost you more than just paying the expenses with cash. Some lenders might charge an origination fee for processing the paperwork and origination fees can range anywhere between one and 10% of the total loan amount. It is also good to check if there are any pre-payment penalty fees if you are able to pay off the loan early to save on some interest charges.

Altered debt-to-income ratio

Taking on another loan is of course taking on more debt and this will alter your debt-to-income ratio. During the life of the loan, it can make it more difficult to borrow in other areas or purchase items that you would need to finance like a car.

So should you take out a loan to help cover the cost of moving expenses? It really depends on your ability to cover the expenses of moving in alternate ways that do not require paying back the money with interest. If it really is a large cost then it may be worth looking into a moving loan. Most often on smaller moves, it may be better to see if you could come up with cash by either borrowing it from a friend or taking on some extra temporary work.

For more information on buying or selling a home in Omaha and surrounding areas please contact us any time.