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What Are Personal Loans Used For?

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What can you use a personal loan for? The short answer is almost anything. But just because you can do something doesn’t mean you should.

We’ll go over the most common reasons to consider a personal loan as well as some examples of when you shouldn’t (even if you technically could).

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Common Uses for Personal Loans

Once a lender approves your personal loan and the funds are transferred to your account, you’re generally free to spend the money as you please. That means there’s an almost unlimited number of ways you could use the loan.

Here are some of the most common ones.

Debt consolidation

Using a personal loan for debt consolidation is one of the most common and responsible ways to use a personal loan.

If you have debt from multiple sources, like credit cards, using a personal loan can allow you to consolidate your payments. It can also potentially save you on interest. In short, that leaves you with fewer payments to manage and maybe a smaller monthly payment. Win-win.

Home improvement

Personal loans for home improvement financing are another common example. Home renovation projects can be expensive, but they can also add instant value to your home. A personal loan can give you access to the funds you need to upgrade the kitchen or bathroom and elevate what your home is worth.

Personal loans usually range from $2,000 to $45,000, depending on the lender you use. That’s a substantial amount of money you could put back into your home.

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Emergency expenses

In an ideal world, everyone would have an emergency fund to rely on when misfortune strikes. Unfortunately, not everyone has that option, and some emergencies may be more than your fund can cover.

Personal loans can be used to cover unexpected emergency expenses, like medical bills or urgent vehicle repairs. One of the reasons personal loans are so popular in these situations is that you can be approved and receive the funds quickly, sometimes as soon as one business day.

Moving costs

Depending on how far you have to go, moving can be expensive. Even if you do it yourself, renting a vehicle and paying for gas isn’t cheap, especially if you’re crossing state lines. If you choose to hire a moving company, the operation could cost you thousands of dollars.

A personal loan can help you cover the costs of getting set up in your new digs. Due to the flexibility of the funds and the speed with which you can receive them, they’re a popular option for those looking to move in a hurry.

Wedding costs

The average cost of a wedding hit $29,000 in 2023.[1] That’s a considerable amount of money. Many people opt to finance wedding expenses, and a personal loan is one way to do that.

Later, we’ll cover some questions to ask yourself before committing to a personal loan. Remember, with these loans, “should you?” is often the more important question than “can you?”

Vacation expenses

It is possible to take out a personal loan to use on vacation expenses. These are sometimes referred to as vacation loans.

Flights aren’t cheap, especially if you’re going overseas. Factor in accommodations, food, drink and entertainment, and the expenses quickly stack up – even more so if you have a large family.

When You Shouldn’t Use a Personal Loan

The operative word here is “shouldn’t.” Technically, you could use a personal loan on some of these examples.


Sports betting is becoming legal in more states and casinos are a popular draw across the country. If you enjoy legal gambling, be sure to do so responsibly and never bet more than you can afford to lose.

When you take out a personal loan, you are taking on debt. You should never, ever gamble with those funds.

Illegal activities

To be clear, you shouldn’t break the law regardless of where you get the money. But using a personal loan to fund illegal activities is a particularly egregious use of the funds as you are taking on debt to commit a crime.

Luxury items

Fancy cars, high-end electronics, a new phone – there’s no shortage of luxury items consumers may want. And, technically, you could take out a personal loan to purchase these items. But financing the purchase of a luxury item is absolutely not a good reason to take out a personal loan, especially if the item you purchase will depreciate in value over time.

Volatile investments

From cryptocurrency to the stock market, there are many different ways to invest. It is not good practice to take out a personal loan to invest in volatile assets.

The reason is that you’re taking on debt to purchase the asset. Depending on factors outside of your control, that asset could become worth significantly less than what you paid for it, or even worthless. You don’t want to be paying back debt on a worthless asset, so it’s safer to invest in a volatile asset from your savings.

Student loans

Many lenders actually prohibit you from using a personal loan to pay back student loans. Even if you were committed to this idea in theory, in practice, you’ll have a hard time finding a lender who will issue a personal loan for this purpose.

Assuming you can find a lender that will allow you to do it, it still might not be a good idea. You’re likely to qualify for lower interest rates with student loan financing than with a personal loan. You would also lose out on tax benefits like student loan interest deductions.

Down payment on a house

You cannot take out a personal loan for a down payment on a conventional loan or a Federal Housing Administration (FHA) loan. Lenders will verify that you have the funds to afford a down payment on your own.

Even if you could do this, it wouldn’t be a good idea. Generally speaking, personal loans have shorter repayment terms and higher interest rates than mortgages. You would likely owe a significant monthly payment on your personal loan each month, in addition to your mortgage payment.

Questions To Ask Yourself Before Taking Out a Personal Loan

As you can see, there are many different things you could use a personal loan for. To help you decide if you should, we’ve put together some questions to ask.

  • How much do you need to borrow? Many personal loan lenders have minimums regarding how much you can borrow. If you only need a few hundred dollars, a personal loan might not be an option. Conversely, you’ll also want to confirm the loan limit is high enough to cover the expenses you need.
  • Can you afford to pay the loan back? This is critical. Make sure that you have the means and a plan to pay back the loan. Failure to do so can have severe negative consequences for your credit score and beyond.
  • What is the annual percentage rate? Lenders will charge you both interest and loan fees to issue you a personal loan. Annual percentage rate (APR) is a metric that combines those expenses so you can see the true cost of borrowing money.
  • Will you regret the loan in a year? You’ll most likely be paying back the loan for years. Ask yourself if what you need the money for will still seem like a good investment a year down the road.
  • Do you really need the loan? Taking out a personal loan means taking on debt. Between interest rates and lender fees, you’re also paying for the privilege. If you can achieve your goals through budgeting and saving, or increasing your income, it’s worth taking the time to investigate those options. 

Final Thoughts on Personal Loan Uses

Personal loans can be a tremendous financial tool you can use in a lot of different ways. But remember, make sure you have a responsible use for the loan in mind and that you have a solid plan for paying it back before applying.

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The Short Version

  • Personal loans can be used for almost anything. Debt consolidation, home improvement and covering emergency expenses are some of the most common uses
  • You shouldn’t use a personal loan for gambling, illegal activities, purchasing luxury items or volatile investments
  • Before taking out a personal loan, make sure that you have a plan to pay it back
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  1. Zola. “How Much Does the Average Wedding Cost in 2023?” Retrieved November 2023 from

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