What's the Best Way to Finance a Move?

Moving to a new home can be very costly. Read on to figure out your options for financing your move.

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Moving is more expensive than most people realize. In fact, the average cost of moving within your state is around $2,300, while the average cost of an intrastate move is $4,300.

The cost of a move can be high, because you have to pay for moving equipment -- such as boxes and packing material -- and then pay movers to transport your stuff. Paying for insurance is also a good idea, as you probably can't afford to replace all your possessions if something goes wrong during the move.

While moving may have a big price tag, it's often necessary to fulfill work or family obligations or to attend school. If you're planning a move and don't have the cash to pay for it, here are a few of your other options for financing your relocation.

Use a credit card

Using a credit card can be a good way to fund a move. Before considering this payment method, you need to find a mover that will let you pay with plastic, as you absolutely do not want to take a cash advance. Credit card cash advances often charge much higher interest rates, in addition to extra fees.

Fortunately, many moving companies accept credit cards. If your mover does, you'll need to make sure you have enough available credit to pay for the expenses you can't cover on your own. If your credit card has a $2,000 limit and your move costs $4,000, you'll need to come up with a hefty sum in cash, because your card won't cover everything.

You should also consider how long it will take you to pay off your moving expenses, as the interest rates on credit cards can be quite high. If you make only minimum payments on the moving expenses you charge, you'll significantly increase the total costs of your move, and it could take you years to pay for it.

Borrowing $4,300 for a move on a credit card at 16% interest, for example, could leave you paying a total of $4,203 in interest charges if you made minimum payments equal to the greater of 2.5% of your balance or $25. Not only would the cost of the move nearly double, but it would take you more than 15 years to pay off the balance.

If you're going to use a credit card, one way to keep interest costs down is to look for a card with a 0% promotional APR. Cards offering these 0% rates often charge you no interest for anywhere from 12 to 15 months. If you can make a plan to pay off your move during the time the promotional rate is in effect, you could essentially finance your move interest-free.

Be aware that relocating often comes with lots of unexpected expenses (such as repairs in your new home, new furniture, and more) so make sure you're very confident you can pay off the balance due. Otherwise, when the interest rate spikes at the end of the promotional period, you'll be stuck paying a fortune in interest on any balance remaining.

Take out a personal loan

Using a personal loan could also be a good approach to funding a move, especially if your relocation fees are near the high end of the scale. Personal loans come with lower interest rates than credit cards in most cases. They also have a fixed schedule for payments -- and a set deadline for when the loan will be paid off -- so you'll know exactly how much you owe each month and how long it will take to become debt-free.

There are some situations in which using a personal loan doesn't make sense. If you can move inexpensively and you only need to borrow $1,000 or less, a traditional personal loan is likely not an option, since many lenders won't bother with such a small loan. You'll also need to make sure you can qualify for a personal loan at a reasonable rate, as factors such as your credit score and income will affect how much it costs to borrow.

The good news is that there are lots of personal loan lenders out there, so most people who are moving can shop around to find a lender that offers the funding they need at a reasonable rate. Just make sure you read the fine print to find out if there's an origination fee -- which adds to the up-front cost of your move -- or if there's a penalty for prepaying your loan if you're able to pay the loan off early.

The pitfalls of financing a move with a loan or credit

If you're thinking about taking out a personal loan or using a credit card to finance a move, there's one important thing to consider: the impact this could have on a mortgage approval.

If you've purchased but not yet closed on a new home in the area where you're relocating, taking on any new debt obligations could affect your ability to close on the loan.

Lenders consider your existing debt obligations when deciding whether to approve your mortgage, and they can see if you take on more debt right before your move. This could cause a delay as the lender re-evaluates your application in light of your new debt. In a worst-case scenario, you could have problems closing on your loan if your new debt puts your debt-to-income ratio above the threshold your lender allows.

If you haven't yet closed on a mortgage, you may want to wait until your loan closes before opening a new credit card or taking out a loan to pay for your move. If this isn't possible, you should talk to your mortgage lender in advance. Or consider other ways to pay for the move, such as borrowing from friends and family, so that no new debt will show up on your credit report.

The best financing option depends on you

Ideally, you'll find ways to keep your moving costs low enough that you can pay in cash. If you can't, you'll need to carefully consider any credit card and personal loan offers to decide which financing method is best for you.

While many borrowers find a personal loan is the best approach, if you're borrowing a small amount and can pay it off before a 0% promotional rate expires, then a credit card may be a better bet for you

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