Can you take out a loan for rent?

While taking out a loan to cover rent may be a good idea in some situations, it generally isn't. There are many things to keep in mind if you're weighing this decision — including whether you have other options, if you’re likely to continue to struggle to pay rent, and the cost of the loan.

Should you take out a loan for rent?

Generally speaking, it’s probably not a good idea to go into debt to pay your rent. If you’re unable to make rent for one month, ask yourself if this is a one-off need or a recurring situation. If so, it may be better to find a longer-term solution. Loans can be expensive, and while one might provide immediate relief, going forward you’ll have to cover not only rent but monthly loan payments.

However, if your overall financial picture is healthy, and a one-time emergency has made covering this month’s rent impossible, taking out a loan may be the right choice.

If you have a good-to-excellent credit score (a FICO score of 670 or higher), you may qualify for a loan with a low annual percentage rate (APR). Give it some thought and explore all of your options before you take out a loan to cover rent.

What to consider before taking out a loan for rent

You need to consider the cost of the loan and whether you can afford it for the duration of the repayment term. When you take out a loan, you’re not just repaying the principal, or the actual loan amount. You’re also paying back interest and any fees the lender charges. Interest can be a significant amount of money. The average personal loan interest rate for a two-year loan was 12.17% as of August 2023, according to the Federal Reserve. You may also pay an origination fee, which is usually a percentage of the loan amount that is taken out from the loan proceeds.

The interest rate you qualify for is often determined by your credit score. If you have a good credit score, you’re more likely to qualify for a competitive interest rate. But if your credit score is low, you may not qualify for a loan at all, or you might have a higher interest rate — meaning you’d pay more for the same loan amount over time.

Carefully review your budget and the monthly payment you can afford to ensure the extra bill won’t overwhelm you. If you’re already struggling to make rent every month, another loan could further jeopardize your financial security.

Types of loans to consider

Here are three of the most common loans to take out for rent:

• Secured loans: Secured loans are loans “secured” by something you own, often a house, a car, or a financial asset like a CD (certificate of deposit). Sometimes, having a loan secured by collateral will allow you to qualify for a loan amount or interest rate you otherwise would not have. On the negative side, if you default on a secured loan, the lender can take the asset you used to secure it.
• Unsecured loans: Unsecured loans aren’t secured by collateral — instead, you qualify based on your credit and financial profile. Lenders determine how likely you are to repay your loan based on information you provide, and use your credit history, employment information, income, existing debt, and other factors to decide how large of a loan you qualify for and what interest rate to offer you. If they think you’re a risky borrower — one who’s unlikely to repay the loan — they may not lend to you at all, or may charge you a high interest rate.
• Emergency loans: An emergency loan is a type of personal loan used to cover an emergency expense. Loans marketed as emergency loans may offer a faster decision and disbursement timeline. Credit card cash advances, title loans, and payday loans are some examples of an emergency loan.

Pros and cons

Here are some of the major pros and cons to taking out a loan for rent:

Pros

• You’ll pay your rent: The most obvious pro is that you’ll pay your rent and no longer be at risk of eviction or other consequences. Make sure that whichever lender you select can get you your money before your rent is late.
• Your credit score won’t be impacted by a missed rent payment: Your credit score won’t be dinged by a missed or late payment. Your payment history makes up 35% of your FICO credit score, so missing payments can have a negative impact on your future borrowing power.

Cons

• Another monthly expense: Unless you can pay off this new loan in full right away — and that’s probably unlikely given that you had to take it out in the first place — you’re going to end up with another payment you have to make every month, which can add to your overall monthly expenses.
• Pay more in interest and fees: You’ll end up paying more than the actual cost of rent due to interest and fees. After lenders take their origination fee (if they have one) and charge you interest, the total bill will be more than just a month’s rent.
• Adds to your debt: You could end up struggling to pay both rent and your new loan, which will increase your debt burden. If you’re already having a tough time financially, another monthly payment may stretch you too thin.

How to apply for a personal loan for rent

If you plan to take out a loan for rent, consider the following:

• Check your credit score: Since a higher credit score can help you secure a lower interest rate, check your credit score and see if there are any errors that might be affecting your score. If you can get those removed, your score will likely improve.
• Prequalify and compare loan terms: Many lenders, including banks, credit unions, and online lenders, offer a fast and easy online prequalification process to give you an idea of the terms you may receive. Prequalify with a variety of lenders to compare interest rates, fees, payment amounts, and how many months you’ll be repaying the loan. Note that prequalification does not hurt your credit, and is not an offer of credit.
• Complete your application: Once you’ve determined the best option, complete a full loan application. Once you submit it, the lender will conduct a hard credit inquiry which could temporarily reduce your credit score. Expect to provide a government ID, proof of income, proof of employment, and other documentation, such as bank statements.
• Sign the paperwork and receive your funds: If you’re approved, the lender will send you the closing paperwork. Read it closely to make sure you understand the fine print. Then sign and wait for the funds to be disbursed. Many lenders offer very quick disbursement timelines, some as soon as the same day.

Alternatives

If a loan for rent isn’t the right option for you, here are some other ways you may be able to deal with the situation:

• Speak with your landlord: You may be surprised at how flexible your landlord is willing to be, especially if you’re a good tenant with a track record of on-time rent payments. Talk to your landlord and see if they can work with you — they may be willing to accept half now and half in a couple of weeks, or you may be able to come to some other agreement.
• Ask for help: If you have friends or family that can lend you the money, ask if they would be willing to do so. Write out an agreement as to how and when you’ll pay them back — and stick to it.
• Move out or get a roommate: If you think affording the rent will continue to be an issue, it may be best to cut that cost. If doable, consider getting a roommate to split the rent with you. Or move out and find a less-expensive place where you won’t struggle to make the monthly rent payments.
• Boost your income: Find a side hustle to help you cover these expenses. Freelance work, gig work, or a part-time job are all ways to increase your income and help you cover your monthly bills.
• Get nonprofit help: Look for rent assistance programs in your area. Many cities have nonprofit organizations or government programs that can help you with this exact issue. You can also consider 211, an online source with local information.

FAQ

Can I get a loan for rent if I'm currently unemployed?

Yes, you may be able to qualify for a loan for rent even if you don’t have a job at the moment. A good credit score or applying with a cosigner with good credit will help. Lenders may want to see proof of other forms of income, such as unemployment benefits.

What types of rental expenses can I cover with a loan for rent?

The type of loan you take out for rent is most likely a personal loan and not tied to any particular purpose for the money. You’ll be able to cover any costs associated with rent with a personal loan.

Are there any tax implications associated with a loan for rent?

Not if you use a personal loan to pay rent. Personal loans are not considered income and thus are not taxed. 

How quickly can I receive the funds from a loan for rent?

How quickly you can receive funds depends on the lender and your application. Some lenders offer very quick disbursement timelines, such as the same day or the next business day after you're approved. Others will take longer.