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A security deposit loan can you help you cover the cost of moving

Moving? A Security Deposit Loan Could Help

Updated on February 2, 2023

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Home ownership is usually an affordable option for families who earn a steady income and who have good credit scores to qualify for a mortgage. However, in this day and age - especially in a dilapidated real estate market - opting to rent an apartment for the first time may be a more affordable option for those who do not have an established income or a good credit score.

When you're a renter, moving from one apartment to another can be a challenging process that involves a stressful search for that perfect place. However, even after getting the apartment you want and passing the credit check from the landlord, you'll likely need help with the rent deposit. Read on to learn how to get a loan for a security deposit and why you might need one.

The Definition of a Security Deposit

Basically, a rent deposit is a form of monetary consideration that is usually required by a landlord as a security measure. This deposit is often the same amount as your first month's rent.

The deposit can be refunded after you have moved out of the apartment depending on certain conditions. If you're incapable of getting the deposit; there's no need for you to panic as you can get a loan for an apartment deposit from various lenders.

Why Do Landlords Need a Security Deposit?

Having shown you the definition of a security deposit, you should also understand why many landlords request a deposit. The significant reasons for requesting apartment deposits include:

• Incomplete or sketchy information

If you do not fill specific application fields or provide info that makes your landlord have doubts about your credibility; such a landlord may demand a move-in deposit to avoid any problems. Misrepresentation of facts and lies can also have a similar effect or lead to an outright denial of your rental application.

• Refusal of your previous landlord to provide information

If your last landlord is contacted to provide any information on your tenancy, and the landlord refuses to give any information, your potential landlord may require a security deposit.

• Past experiences of the landlords

It may seem unfair to you, but a landlord may request a security deposit from you because of previous tenants. Landlords who have been encountered problems from some of their last tenants may want to protect their investments by simply demanding for a security deposit.

• Out of a job for a long time

Being out of a job for an extended period raises concerns over your ability to pay the monthly rent. Your landlord may deem it fit to get some forms of assurance from you through a move-in deposit.

• Protection of the apartment

In some instances where the apartment has recently been renovated or remodeled by the landlord, the property may be protected from vandalism or unlawful use through a security deposit.

• Possession of pets

Since pets, especially aggressive ones, are capable of wreaking havoc on a property, landlords can sometimes demand a deposit to protect their investments.

As a tenant, you must acknowledge that it is the prerogative of a landlord to request a security deposit or not. Therefore, rather than questioning a landlord over his reason for demanding a deposit, you should seek help with security deposit through various options available.

Overall, it is recommended that you get a full understanding of the landlord and tenant laws of your state. Many states have a maximum limit that a landlord can charge as a rent deposit loan, but some unscrupulous landlords may want to take advantage of your situation to charge more. Understanding the limit can help you avoid falling into the hands of predatory landlords.

How Do Security Deposit Loans Work?

In simple terms, a security deposit loan is a form of personal loan in which the loan is explicitly borrowed to settle a security deposit required when renting a new apartment. When a renter or first time renter wants to take a loan for an apartment deposit, their credit score and financial history are the two basic things that are firstly considered by the lenders.

Applicants with a tremendous financial history and a good credit score are more likely to get approved with excellent loan terms and lower interest rates. Like other types of personal loans, the borrower is expected to pay the security deposit loan back every month for an agreed time.

Since this loan option involves monthly payments with installments, borrowers can use a rent deposit loan to improve their credit history. When compared to other higher-cost options of getting loans, a loan to cover a security deposit is undoubtedly a better option for borrowers. Despite the benefits of obtaining this loan for an apartment deposit, it is worthwhile to note that it can also put you in a financial burden just like other forms of loans. Therefore, you should take caution when applying for this loan.

Types of Security Deposit Loans

If you need help with a rent deposit, it is worthwhile to note that there are two types of security deposit loans, which are:

• Secured security deposit loan

For this type of loan, collateral is required so that the loan company can seize it if you can't afford to pay back your loan. This type of security deposit loan is more suitable for individuals renting with bad credit or poor financial history and usually comes with lower interest rates.

• Unsecured security deposit loan

This loan option does not involve the use of collateral. Although it could have a high interest rate, it is usually open to individuals with a good credit history. If your credit score isn't great and you want to get a loan without collateral, you can explore the possibility of getting a co-signer. However, you must remember that defaulting on the loan can put your co-signer into problems with the loan company. It's still advisable for you to make payment for your loan on time.

Where Can a Security Deposit Loan Be Obtained?

If you need to get a security deposit loan, here are the options you should consider:

• Online Lenders

You can turn to online lenders whenever you need a loan for an apartment deposit. When compared to other options, these online lenders usually offer loans to borrowers within the shortest time possible. However, their loans tend to come at higher interest rates.

• Peer-to-peer lenders

Peer-to-peer lenders involve several individuals who contribute money to loan out to people in financial needs. Generally, they do not have any restrictions on the types of circumstances that can make them lend money to anyone. Nevertheless, it is doubtful that they will approve a loan for someone who needs help with a security deposit because they tend to assist people in more challenging situations like disaster recovery cases.

• Banks and credit unions

These traditional financial institutions are also good options for anyone looking for a security deposit loan. Although their loans are usually provided at the lowest interest rates, they require a very high credit score and take weeks or months for the loan to be approved. The apartment you want might have been given to someone else before securing the loan.

Considerations for Obtaining Security Deposit Loans

To avoid getting into a financial crisis or experiencing delays when getting a security deposit loan, here are some crucial factors:

• You should ensure that you meet the credit score and income requirements of the institution you want to get the loan from.

• Different lenders have varying interest rates and charges; therefore, do not be in a rush to get a loan from anyone. Do not just skim through the document provided by the lender; take your time to know about their interest rates and charges and also understand their terms. If a lender wants to offer you a loan with adverse conditions, do not hesitate to reject it.

• You must know that repayment amounts will be taken directly from your salary account as at a specified date. If you should miss or delay a repayment, you will be penalized.

How Much Can a Landlord Charge for a Security Deposit?

Alabama

Maximum of one month's rent. The landlord can charge a higher security deposit to cover changes to a property, a pet deposit, or increased liability risks.

Go here for more info: Alabama Security Deposit Law

Alaska

Maximum of two months' rent. However, there is no limit if the rent exceeds $2,000 per month.

Go here for more info: Alaska Security Deposit Law

Arizona

Maximum of one and a half month's rent.

Go here for more info: Arizona Security Deposit Law

Arkansas

Maximum of two months' rent.

Go here for more info: Arkansas Security Deposit Law

Connecticut

Maximum of two months' rent for tenants under the age of 62 years. Maximum of one month's rent for tenants 62 and older.

District of Columbia

Maximum of one month's rent.

Florida

No Limit on the deposit.

Hawaii

One month's rent.

See Also: Hawaii Security Deposit Law

Idaho

No limit on the deposit.

See Also: Idaho Security Deposit Law

Illinois

No limit on the deposit.

Indiana

No limit on the deposit.

See Also: Indiana Security Deposit Law

Iowa

Maximum of two months' rent.

See Also: Iowa Security Deposit Law

Kansas

Maximum of one month's rent for an unfurnished unit. One and a half month's rent for furnished units. An additional deposit can be charged for pets of up to one-half month's rent.

Cash 1 Blog

Moving? A Security Deposit Loan Could Help

The Definition of a Security Deposit

Why Do Landlords Need a Security Deposit?

How Do Security Deposit Loans Work?

Types of Security Deposit Loans

Where Can a Security Deposit Loan Be Obtained?

Considerations for Obtaining Security Deposit Loans

How Much Can a Landlord Charge for a Security Deposit?

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