Should You Take a Personal Loan to Pay Rent?

Written by Kim PinnelliReviewed by Nathan Brown, CFP®Updated: 11th Apr 2022
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You can use a personal loan for just about anything, including paying your rent, but it’s not always the best option. If you’re having trouble paying your rent, here’s what you should know about using a personal loan to pay it and why you should look for other ways.

Can You Get a Personal Loan to Pay Rent?

You can use a personal loan for just about any reason, including paying rent. Whether you can use the personal loan funds to pay your rent depends on your situation. First, you must be able to qualify for the loan. Second, you must get approved to rent the apartment or house.

If you don’t have a rental history, it might be harder to get approved for rent since most landlords want some type of housing history.

If you get approved, though, and you need to take out a personal loan to pay the rent, you can, but the real question is, should you?

Should You Take a Personal Loan to Pay Rent?

We do not think it’s wise to take out a personal loan to pay rent. Putting yourself further into debt is never a good idea. Personal loans have high-interest rates and short terms. This means it adds a significant amount of money to your monthly expenses. Why add another bill to your liabilities if you can’t afford your rent?

Also, if you miss payments, you’ll damage your credit score even further, making it hard to qualify for future loans or even rent another place.

>> More: How to Manage Your Personal Loan

4 Reason to NOT Use a Personal Loan to Pay Rent

We’ve made it clear that we don’t think you should use a personal loan to pay rent, but if you need a few more reasons, here you go.

#1. You now have more debt

Borrowing money to pay a bill means you put yourself further into debt. Let’s say you borrow $10,000 to cover your rent for the next year. Now you have the payment on the personal loan to cover PLUS the rent costs when you aren’t using the personal loan funds any longer. Most personal loans last from 3 – 5 years, so you’ll pay double duty when you start paying rent from your own funds again.

This could bury you further into debt and make it hard to afford your regular bills. You could find yourself in over your head in debt, unable to get out.

>> More: What Happens If I Default on a Personal Loan?

#2. Competitive rates are hard to come by

Personal loans aren’t secured, so the lenders don’t have any collateral to fall back on. If you stop making your payments, the lender has to take you to court or send your account to collections.

To make up for this potential risk of default, lenders often charge higher interest rates. This means your payment will be higher, aka harder to afford.

#3. You have to pay interest

There’s no way around it, you have to pay interest on a personal loan. This means you’re paying interest on your rent, which doesn’t charge interest. Essentially, you’re increasing the cost of your rent.

#4. You raise your debt-to-income ratio

Each time you take out a loan, it increases your debt-to-income ratio, comparing your monthly debts to your gross monthly income. The higher your DTI is, the higher risk of default you pose to lenders. If you need any loans or credit cards in the future, they could be hard to get, not to mention that a high DTI means it’s harder to afford your bills.

Alternatives to Taking Out a Personal Loan to Pay Rent

The good news is that if you’re having trouble making your rent payments, there are other options besides a personal loan.

#1. Borrow Money from Friend or Family

Friends and family are usually willing to help in a crisis. If you can’t afford your rent because of a job loss, illness, or another personal reason, consider reaching out to your circle to see if they can help. You might be surprised to learn how many people might help.

#2. Start a Side Hustle to Make More Money

If you lost your job or just aren’t making enough to make ends meet, consider starting a side hustle. Earmark the funds for rent, so you stay on top of your payments rather than spending the money needlessly.

You can start a side hustle doing just about anything today, whether you drive for Uber, deliver for DoorDash, shop for Instacart, or start something yourself. You can sell homemade goods online and offer freelance services virtually, to name a few great ways to start a side hustle.

#3. Consider Moving to a Cheaper Place

If your rent is too high and your lease will end, consider moving. You might be in a high rent district, or maybe the landlord increased the rent, and it’s just not affordable. It’s okay to change where you live, that’s the flexibility of renting. Find somewhere you can afford better so you aren’t getting in over your head with the rent you can’t afford.

#4. Charitable Organizations

Many charities offer assistance to people in financial trouble. Catholic Charities and the Salvation Army are two of the most popular charities that help people in this situation. The help is temporary, but it can get you out of a hard spot.

#5. Government Programs

HUD and Section 8 Housing are great resources to check for rental assistance. If you can’t get ahead of your rental payments, consider looking to see what supports they could provide.

When Is Getting a Personal Loan to Pay Rent a Good Idea?

We rarely endorse getting a personal loan to pay rent, but there is one exception.

If you know you’re coming into money, maybe you are in between jobs and your new job starts in a few weeks or months, or you are getting an inheritance, and you know beyond a reasonable doubt you can pay off the loan quickly and get back on track with your rent, a personal loan can be a temporary solution.

Again, we stress that this is only a good idea if you know for sure you can pay the loan off fast, and you will be able to afford your rent again.

>> More: What Types of Personal Loans Are Available?

When Is Getting a Personal Loan to Pay Rent a Bad Idea?

It’s almost always a bad idea to take a personal loan to pay rent. Putting yourself further into debt, paying interest, and risking your credit score is never good.

It’s best to explore your other options and see how you might be able to get ahead again. Worst case scenario, you can move and find a cheaper place to live, so you don’t have to worry about putting yourself in over your head in debt.

Is It Safe to Use a Personal Loan to Pay Rent?

It’s generally not safe to use a personal loan to pay rent. You put your credit and finances at risk. If you can’t make the payments, you’re dealing with a collection agency and unpaid accrued interest and penalties, which is never fun.

Unless you are in a unique position where your situation is temporary, and you know you can pay the loan quickly, using a personal loan to pay rent isn’t safe.

Bottom Line: Should You Take a Personal Loan to Pay Rent?

Try exhausting all other options before taking a personal loan to pay rent. Use it as a last resort after asking friends and family for help, looking for charitable or government programs, or even talking to your landlord about breaking the lease early so you can find somewhere cheaper to live.

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Kim Pinnelli
Kim Pinnelli

Kim Pinnelli is a Senior Writer, Editor, & Product Analyst with a Bachelor’s Degree in Finance from the University of Illinois at Chicago. She has been a professional financial writer for over 15 years, and has appeared in a myriad of industry leading financial media outlets. Leveraging her personal experience, Kim is committed to helping people take charge of their personal finances and make simple financial decisions.