When to finance a cross-country move with a personal loan

Picking up and moving across the country is no easy feat. From organizing your belongings, packing up, moving yourself and making a new space a home, the whole process can be overwhelming.

The cost of a long-haul move isn’t a cheap expense, either. Costing well into the thousands, it may seem tempting to reach for a personal loan to finance the cost. But while it is helpful to some, a loan is not a one-size-fits-all option.

I recently spoke with Jeremiah, a young adult who recently embarked on a cross-country move from the South to the West Coast, and asked him about his experience with paying for a move from one coast to the other.

Average cost of a long-haul move

The average cost of a cross-country move can range between $4,000 to $8,000. However, the costs can fall below or well exceed these ranges depending on the total distance traveled, the weight of your move and the amount of time it takes to transport your items. This number excludes the cost of living in a different city — also known as the cost of living index — and only takes moving-specific expenses into account.

Hindsight is 20/20: How a low-interest loan may have been helpful in easing moving anxiety, promoting caution

When Jeremiah took the leap, packed up his life and moved to California this year, he said he didn’t consider a loan since he was moving into another rental unit and had some savings. “I had saved up a little nest egg for a potential home down payment the year before,” he said. “This move would have been for a rental so I didn’t need all that cash handy and could dip into savings to afford it.”

He added that if he were to move again, he probably wouldn’t take out a loan if he had the same nest egg. However, he can see the appeal of taking out a low-interest loan on top of the cash for more ease of mind.

“The idea of a loan would make me a bit more cautious about the move [or] less impulsive [or would] make me really consider all the reasons why I want that adventure,” he said.

How to finance unexpected moving costs

There will always be bumps in the road and unexpected costs that arise, so the best thing you can do is to be prepared financially for any emergencies that could pop up.

For Jeremiah, some of these situations couldn’t have been more unexpected.  “Unfortunate unexpected costs were related to pre-shipments being stolen [or] needing to ship myself something twice,” he said. “Thankfully I could dispute with Amazon or Ikea but some returns or disputes passed the window if I purchased too far in advance.”

A personal loan or credit card could be useful for financing emergency expenses — like paying for stolen furniture — rather than trying to pay out-of-pocket for new furnishings. However, never borrow more than you need and pay attention to the rates you’re offered; you don’t want to be paying off that new sofa and television for years down the road.

Before taking any financial action in the case of an emergency or unexpected event, it’s always best to check with the moving furniture company to see if  they have a refund or replacement policy.

Pros and cons of using a loan to pay for a move

Just like every other financing option, using a loan to cover the cost of a move has both its advantages and disadvantages. Whether it’s the right choice for you depends on your immediate needs, your financial situation and whether your budget will comfortably allow for the payments in the future.

Pros

• Ease of mind if emergencies arise
• May help promote cautious spending
• Can be used for furnishing, mover expenses and any non-discretionary costs that are involved with a road-trip or longer flight

Cons

• Low interest rates are harder to get approved for
• Could be paying it off for years down the road
• Have to keep up with the monthly payments to limit interest accrual and credit decline

When to consider a personal loan to cover the cost of a move

If you’ve exhausted all of your other options and still need cash for your move, then it may be time to look into a personal loan. Just be aware, right now may not be the ideal time to borrow a personal loan, especially if you have unstable or low credit. Interest rates are currently at an all-time high — according to a Bankrate study, the average rate is 12.36 percent.

Borrowers with good credit who meet all of the lender’s minimum application requirements will be able to get the best deal on a personal loan. If you have less-than-good credit, you could be offered sky-high interest rates and fees that could end up setting you back financially.

If you have a good-to-excellent credit score, a steady income and a strong credit history, then it may be worth it to prequalify with a few lenders to see if the rates are competitive enough to make a loan worth it in the long run.

With the average rate being so high, it’s possible that the interest accrual alone could amount to more than the cost of the move over the life of the loan. That being said, taking out a personal loan right now may not be the best funding option — excluding those who qualify for the lowest rates and fees.

How to find the best personal loan

Since there is no universally accepted ‘best’ personal loan, compare lenders to find the best loan for you. Prequalify whenever possible and for as many lenders as you can to compare rates and find out what the most competitive offer looks like for your credit situation.

What’s best for you will also depend on whether the lender offers benefits and perks that will assist you in managing your balance. For example, it’s common to see banks offer an interest rate reduction as a loyalty perk for current customers or lending institutions offer a similar perk for enrolling in autopay.