You can use a personal loan for just about anything, from credit card debt consolidation and car repairs to weddings, home improvements and medical procedures. As long as you don’t take out a loan whose terms specify what the funds must be used for, you’re free to do what you want with the money. For example, LightStream has different APR ranges specifically for different loan purposes, but most lenders do not.
The only things you’re really not allowed to spend the money on are school tuition (you need a student loan instead), gambling and illegal purposes.
Things you can use a personal loan for:
- Debt consolidation: You can use a personal loan to pay off existing debts, putting everything together with one easy monthly payment. This is a good option if you can get a lower APR on the personal loan than the APRs on your existing debts.
- Medical/dental bills: Medical bills are an unavoidable expense, and a personal loan can help you finance them over time instead of being overwhelmed immediately after treatment. You can also refinance expensive bills that are already taking a toll on your wallet.
- Home improvement: Home improvement expenses are often a good thing to use a personal loan for because they can increase the value of your property.
- Starting a business: Starting a business can cost thousands of dollars, even if it’s a small sole proprietorship. And it’s perfectly legal to use a personal loan for business. But doing so can be a gamble, considering 50% of small businesses fail in the first five years.
- Emergency expenses: Some lenders, like LightStream, offer the possibility (but not the guarantee) of same-day funding. Most personal loans will be able to provide financing in 7 business days or fewer, though some may take up to a few weeks.
- Car repairs: A broken car can make your life incredibly difficult. Taking out a personal loan to pay off the repairs can ensure you get back to normalcy sooner. The average American household spends over $800 per year on car repairs, according to Liberty Mutual. Personal loans are usually for $1,000 or more.
- Weddings: It’s good to have a memorable wedding. But it’s not the best idea to use a personal loan for one, even though it’s allowed. You probably don’t want to start married life with heaps of debt.
- Funerals: A funeral could cost over $10,000. If you can’t pay for the funeral out of the deceased’s estate or your own savings, you might consider a personal loan.
- Vacations: Vacations are fun, but they are a luxury. It’s best to pay for them using money you already have saved, but you can use a personal loan if you want to.
- Veterinary bills: If you’re unable to pay for your pet’s medical bills all at once, a personal loan can help you spread out that expense.
- Big purchases: You can buy pretty much anything with a personal loan, as long as it’s not illegal. But the best purchases to make are ones that are essential or a good investment, especially those too large to put on a credit card.
Those are just some of the expenses for which you can use a personal loan. However, just because you can use a personal loan for almost anything doesn’t mean you necessarily should. Personal loans charge interest and fees, so it’s best to only take out a loan for expenses that are necessary or will profit you in the long run.
A medical bill is an example of something that might be necessary, and remodeling a kitchen is an example of something that could make you money by increasing the value of a home. On the other hand, while you might be tempted to take out a loan for your dream wedding or vacation, it’s better to save first and only spend money you already have.
Finally, it’s worth noting that you won’t be able to use a personal loan for anything if you can’t get approved for one. Personal loans tend to require a credit score of at least 660, though some accept lower scores. You can see your personal loan approval odds with various lenders by using WalletHub’s free pre-qualification tool.
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