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 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 (690 credit 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 ding your score as much as 100 points.

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.