Should You Take a Personal Loan to Pay Rent?

If you’ve lost your job or encountered a big emergency expense, you may find you don’t have enough money to pay rent. A personal loan may seem like a feasible short-term fix.

But unsecured personal loans are an expensive way to cover rent and should be a last resort. Learn about more affordable options, including where to find local assistance for renters.

» MORE: How to pay rent when you can’t afford it

A personal loan for rent is an expensive option

Taking a personal loan for rent can address a budget shortfall, but you’ll need to consider the risks. Here’s what to know before taking a personal loan to pay your rent.

1. Taking a personal loan adds debt. Each month you’ll owe both your rent as well as an installment payment on the new loan. If you take a $6,000 personal loan with a 18% annual percentage rate (APR) and a 12-month term to pay for three months’ rent, you'll now have an additional $550 monthly loan payment.

2. You’ll owe interest on the loan. Depending on the APR and repayment term, you could wind up paying as much interest as you would for a couple months’ rent. For example, a $10,000 personal loan with a 25% APR and 36-month term would cost $4,314 in total interest.

3. You need a solid credit score and credit history to get a good interest rate. Personal loans with lower interest rates are typically only available to people with good or excellent credit scores (mid-600 score or higher).

4. Your credit will take a hit if you miss loan repayments. One of the key factors that determine your credit score is payment history or how consistently you make on-time payments on your debts. Missing even one monthly payment can hurt your credit score.

When taking a personal loan for rent may make sense

If you’re thinking of taking a personal loan to pay rent, consider how quickly the loan can be paid back. If you need a loan as a short-term financial raft, and you’re certain you’ll soon have the funds to pay it off, borrowing a small amount may make sense for you.

For example, if you’re starting a new job and you’ll have a temporary gap between paychecks, or you’re moving apartments and need help paying your new security deposit while awaiting a refund of your old one, you may be able to pay off the debt quickly.

But personal loans still come with interest. Calculate your payments below to see if a personal loan is the right option for you.

It’s best to avoid borrowing when possible. Building up an emergency fund of even $500 can prevent a similar cash flow shortage in the future.

» MORE: Can I pay rent with a credit card?

Other options for help with rent

Before you borrow, consider these other ways to get assistance with your rent payments.

• Talk to your landlord. If you have a history of making on-time rent payments, your landlord may be willing to offer some assistance. This could come in the form of waived late fees, an installment plan or deferring payment for a month.

• Call 211. 211 can connect you with local social services, including nonprofits and religious organizations, that can help you with rental assistance or help you discuss a payment plan with your landlord. All calls are confidential. 

• Supplement your income. Consider ways to make extra money to cover your financial gap. You could get paid to take surveys, tutor online or by selling gently used clothes.

• Ask for help from loved ones. Borrowing money from family or a friend will likely come with better terms than borrowing from a traditional lender. You can make the ask easier by writing down the terms, including when you’ll pay the loan back and if you’ll pay interest.

• Change your living situation. If your apartment lease allows you to sublet your apartment or rooms within, discuss these options with your landlord. Moving in with a friend or family member for a short period of time while you sublet your apartment could cover your funding gap.