First Month, Last Month, Security Deposit! Can You Use a Personal Loan to Rent an Apartment?

personal loan to rent an apartment

Renting an apartment can be full of hurdles. Sure, you can handle the rent. But in some states, landlords can charge you upfront deposits equaling several months’ rent. So how do you come up with this? Especially when you’re likely to need it before your last landlord returns (hopefully) the deposits that you already paid? Fortunately, lenders offer security deposit loans. You may be able to use a personal loan to rent an apartment.

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Tenant security deposit: how much can your landlord charge?

If you’re wondering, “How much can my landlord charge upfront in my state?” you may be in for a shock. In many cases, it’s customary to charge you for the first month, the last month, and a damage deposit. And these amounts can increase if you rent with a pet.

Here is a list (as of 2017) of what states allow landlords to charge, courtesy of Note that several of them have NO statutory limit.

maximum tenant deposit by state

Use a personal loan to rent an apartment

Assuming that you paid a deposit to your previous landlord, and assuming that this person is fair and that you did not destroy the place, you’re likely to get your deposit returned within 14 to 30 days, depending on your location. But in the meantime, you’ll have to show a prospective landlord that you have resources (savings) as well as income when you apply to rent.

You’ll also, if approved, have to come up with a substantial deposit, even though your old deposit won’t yet be on hand. This is where a personal loan for your rent security deposit comes in.

Choose a loan with a short term

You don’t want to be paying your security deposit loan forever. If you expect to cover most or all of the amount when you get a previous security deposit returned, get a loan with the shortest possible term. If you anticipate problems with the return of your deposit, or you don’t have a previous deposit coming back to you, borrow over a long enough term that you can afford the payments.

Borrowing more to fix your cash flow

If  you have other high-interest debt, consider borrowing enough to pay off those other accounts as well as finance your security deposit.

In many cases, you can reduce your interest rates by replacing credit card accounts with an installment account like a personal loan. And that can make the burden of paying your security deposit loan easier.

It may also make you look better to landlords when you apply. Suppose you have $3,000 in maxed out credit cards and also need $2,000 for your security deposit. Assuming that you can reduce the interest rate you;re paying on your cards, you may be able to gain some advantages by borrowing $5,000.

  • Once your cards are paid off, your credit utilization ratio drops. That can increase your credit score dramatically
  • You have money in the bank when the landlord checks your bank balances
  • You’ll be able to pay your security deposit, first and last month’s rent.

However, don’t see this as an opportunity to run your credit cards back up or spend your deposit when it’s returned.

Related: Personal Loan for Debt Consolidation

Pay your personal loan off as soon as possible

Assuming that you paid a last month’s rent and security deposit to your previous landlord, you’ll be able to direct money toward your personal loan repayment fairly soon. Your last month’s rent has been prepaid, so save what you would have spent on the first of the month. Keep it for your next home so that you can borrow less for your tenant deposit. Or use it right away to reduce your balance and interest expense.

When you get the rest of your deposit back,  use it also to reduce your personal loan balance. Don’t give in to the temptation to throw a huge housewarming party with the money instead. Most of your friends will probably be happy if you didn’t ask them to help you move. And they’ll be fine with pizza and beer.

See personal loan interest rates