A relocation loan, also referred to as a bridging loan, is basically a personal loan used to pay for moving expenses.
Getting a relocation home loan can be genuinely efficient when you’ve found the place you wish to move to, but you might be lacking the extra cash to pay for movers, rent a truck, or pick up certain expenses.
How Can a Relocation Loan Help You?
As we already indicated above, a relocation loan can provide you the funds you need for moving. Still, as you might expect, there are significant costs associated with this type of financing. Nevertheless, the good thing is that the competitive market has slightly diminished the overall expenses linked to this type of loan.
What Are the Expenses Associated with It?
Aside from the interest and the principal balance of a loan, there are additional fees, which vary by the lender. Many a time, the fees might result in thousands of dollars. Truthfully, the additional fees are much more important than the actual interest rates, especially if we were to consider that the duration of the loan is short. Fees you should be aware of include: origination fees, late fees, and prepayment penalties.
How Can You Get a Loan for Relocation?
Each lender’s eligibility criteria are different. The first and foremost criterion to keep in mind is your credit history or credit score. If you have decent credit, then you should be able to get a personal loan with most lenders.
You should analyse the different lenders’ eligibility criteria before filing an application, and try to anticipate your chances of approval.
What’s the Alternative?
The alternative to getting a relocation loan would be covering the expenses with out-of-pocket money. Therefore, if you don’t have the financial means to do that, you’ll be in difficulty. Paying out of pocket is cheaper for sure, but it might not be viable.
Nonetheless, a relocation loan allows you to get to a new property quickly. You may receive your loan in a matter of days, which can be time-effective. Additionally, in comparison with other forms of financing, a relocation loan has shorter terms, so you can try to pay it off quickly if desirable.
What Are the Drawbacks of a Relocation Loan?
Although we said that a relocation loan’s short term accounts for an advantage, it also serves as a drawback. If you can’t manage to repayment, every missed payment will garner more interest. Additionally, associated fees add to the cost of the loan, making it rather pricey.
Additionally, if the borrower makes the mistake of overestimating the value of their existing home, they might be unable to make the necessary repayments in a timely manner. This would negatively affect their credit score in the future.