How to apply and qualify for a loan for rent payments

(Request from Michelle in Atlanta, Georgia) I am requesting how to apply and qualify for a loan for rent payments.

How long does it take for the application to process and receive funds?

How much can you borrow?  At what interest?

Dear Michelle,

You can select one of two possible methods to qualify for a loan for rent payments. One is based on financial strength while the other is based on need.

Loan Qualifications

Getting approved for loans from most banks requires that you meet a number of common requirements. The overall decision will be based on how likely the bank determines you to be able to repay the loan with interest. Here are some core requirements that most mainstream financial institutions share.

• Documented income will help you qualify for a loan for rent. Lenders like to see evidence that you are making enough money to be able to cover typical household expenses while still having enough left over each month to put towards a loan payment. W-2 income is the easiest type of income to prove, while 1099 income can still qualify you for a loan. Longer employment history can improve your chances, whereas a recent job change may reduce the amount you may borrow.
• Good credit can help you get approved for loans. Additionally, your actual credit score can dictate your interest rate and monthly payment. The better your credit score, the lower the finance charges and smaller the monthly payment that you must make. Prior delinquencies or defaults can lower your score and make it difficult to qualify for loans. There are other factors for credit scoring as well.
• Membership requirements at each financial institution may vary. You may have access to some credit unions based on where you live or work, but others may restrict membership to certain groups. Additionally, it is possible that a previously defaulted checking account at another bank may cause a red flag at ChexSystems, which could bar you from opening an account with the bank for 5 years.

Most rental assistance loans begin at $1,000, with unsecured amounts rarely exceeding $10,000 for most borrowers. If approved, a check can be cut within the hour. Interest rates can be in the mid single digits (5-7%) although they are usually 9-16% for most banks and credit unions. Consumer finance companies may charge up to 30% or more. Payday loan companies average 391% APR.

Needs-Based Loans for Rent Payments

Tenants who are at a disadvantage when applying for loans may find that they may need to consider alternative programs. Instead of borrowing money from banks, credit unions, finance companies or payday loan companies, you may discover that your recent bad luck could actually improve your chances of receiving cash assistance. I realize this may be difficult to understand, but it a fact of many social programs that provide grants and loans for rent payments.

Whereas banks want to see solid income and good credit, social programs are geared to help people left out by banks. A disruption in income or unexpected financial crisis could actually increase your qualifications for low/zero interest loans and even outright grants that do not have to be repaid. Most programs actually require that you have experienced a recent financial hardship before you may even qualify for funding.

Some of these programs are government funded. You can usually find out about them at your local social services office. Others are funded through grants from foundations, companies and individuals that donate money.

The best thing you can do is to educate yourself on your own qualifications to determine what your best course of action may be. You may find speaking to a case manager at one of your local rental assistance agencies can be very valuable. They can provide feedback on how your situation compares with their other clients and recommend options that you can take.

The amount you may obtain usually depends on how much you would need to meet your immediate housing needs. Back rent assistance usually pays no more than 2 months worth of rent to catch you up. Other programs may provide a first month’s rent and security deposit to help you move. The application process is short, but there could be a waiting list for some programs. Delinquent rent tends to be paid the quickest, since their goal is to catch up your balance before you are evicted from your apartment.