What Can I Use a Personal Loan For?

Common Uses for Personal Loans

Person sitting at a table and calculating finances

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Personal loans are flexible ways to borrow money with no collateral and often at fixed interest rates. If you have a large expense and don't want to use a credit card—or your credit limit isn't high enough—a personal loan may be a feasible solution. A fixed repayment period means you'll steadily pay down your balance over time.

Personal loans can be used for a variety of expenses, including debt consolidation or weddings. You may see loans marketed for specific occasions, such as a "wedding loan," but personal loans can be used for just about anything. Here are a few ways you can use a personal loan.

Key Takeaways

  • Having limited savings can make it difficult to tackle major expenses.
  • Personal loans can be used for a variety of purchases, with only a few lender restrictions.
  • Most lenders don't allow personal loans to cover college expenses or consolidate student loan debt.

Debt Consolidation

A personal loan can help you tackle your existing credit card and loan debt by combining several balances. After consolidating your debt, you'll make one lump-sum payment to cover your entire balance rather than sending smaller monthly payments to several different creditors. On top of easier debt management, you may get the benefit of an overall lower monthly payment and interest savings, depending on the terms of your loan.

You can use the loan to pay off your credit cards and other balances directly. Some lenders may help you consolidate your debt by directly disbursing funds to the credit cards or lenders you've selected.


Consolidation can free up your available credit, creating the potential to get back into debt. Be cautious about using your credit cards for new purchases.

Medical Bills

One trip to the hospital can generate several bills, even if you have health insurance. A personal loan may allow you to take care of your hospital bills, avoiding escalated collection efforts and damage to your credit. You can even take out a personal loan to cover upcoming medical or dental expenses that aren't covered by insurance, or to consolidate medical bills for a relative or pet.

Home Repairs

Sometimes you may need quick access to funds for urgent home repairs—such as fixing a damaged roof or replacing broken windows—and getting a home equity loan or line of credit isn't an option, either because you don’t have enough equity, or you don’t want to put your home in jeopardy if you’re unable to repay the loan for some reason. Using a personal loan for emergency home repairs allows you to get funding quickly so you can focus on protecting one of your biggest investments. Another benefit of using a personal loan is that your borrowing capacity isn't limited by your home’s value.

Helping or Repaying Family

Sometimes a personal loan isn't about helping yourself. You can use a personal loan to repay a friend or relative you borrowed money from. This may help salvage a broken relationship or ease ill feelings over the outstanding obligation. You might opt to use a personal loan to help a friend or relative who's in a tough spot but can't qualify on their own. Of course, you're still ultimately responsible for repaying the loan.

Larger Purchases

A personal loan may be a sensible way to pay for large expenses such as new furniture for your living room or bedroom, a new entertainment system, or new appliances for your kitchen. A loan may be a much more attractive option than financing with a store credit card, which may carry a higher interest rate, offer a smaller credit limit, or include risky deferred interest deals.

Personal Events

Whether you've been planning for months or life has thrown you some unexpected changes, major life events can get pretty expensive. Covering out-of-pocket expenses for things like a wedding, divorce, vacation, family planning, or funeral might be out of the question. A personal loan lets you break down the cost of large events into monthly payments that, if you’ve planned properly, will fit within your budget.

Starting a Small Business

While there are loans specifically designed for small businesses, they're not always easy to apply or qualify for. A personal loan can help you cover some of the costs of starting or expanding your small business with a simple application process—as long as your lender allows you to use your loan for business (not all do). As your business grows, you can repay your loan with the increased revenue. Keep in mind that you're personally responsible for paying back the loan even if the investment doesn't pay off.

What Can You Not Spend a Personal Loan On?

Generally, personal loans aren't meant for you to spend on higher-education expenses or to tackle student loan debt. Federal regulations stipulate lenders must meet certain reporting and disclosure requirements for student loans, so many personal loan providers prohibit their use for education purposes.

Federal student loans are a better option anyway, since they often come with more benefits, like forbearance provisions, flexible repayment options, and tax-deductible interest. Even private student loans are better designed for students than personal loans are.

Personal loans are also not commonly used to buy a home, since they typically have much shorter repayment terms and higher interest rates than mortgage loans. And although you may be tempted to use a personal loan for a down payment, you are prohibited from doing so with a conventional or FHA mortgage. Even if your lender allows it, using a personal loan for a down payment will increase your debt-to-income ratio, which can then hurt your chances of getting approved for a mortgage.


While some lenders don't ask how you're planning to spend your personal loan funds, keep in mind that federal student loans are generally the better option for college expenses. Similarly, a mortgage loan, with its lengthier repayment terms and lower interest rate, is a better option if you’re considering buying a home.

Frequently Asked Questions (FAQs)

Can you use a personal loan on multiple items?

Yes. Once the loan has been deposited into your account, you can decide how you want to use the funds. If you've qualified for a high enough loan amount, you may be able to meet multiple goals with just a single personal loan.

What do most people use personal loans for?

Personal loans are commonly used to consolidate debt. During the COVID-19 pandemic, however, more people turned to personal loans to deal with financial hardship.

Can personal loans be used for anything?

While you have a lot of flexibility for using a personal loan, there are some limits. You may not be able to pay for college expenses or consolidate student loan debt. The lender may also rule out using a personal loan to consolidate secured debt such as an auto or home loan. Some lenders may not allow you to consolidate credit cards you have with them.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Discover. “​​Frequently Asked Questions.” Accessed Nov. 15, 2021.

  2. Consumer Financial Protection Bureau. “​​Six Tips To Consider When You’re Offered a Retail Store Credit Card.” Accessed Nov. 15, 2021.

  3. Experian. “Growth of Personal Loan Debt Slows Amid Pandemic.” Accessed Nov. 15, 2021.

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