What can I use a personal loan for?

Here is what you should (and shouldn't) use a personal loan for.


Fact checked

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

There is a range of credit options available to you should you need them, and personal loans are just one of many. So, in which situations should you consider a personal loan and when should you avoid one? Find out in this guide.

What can I use my personal loan for?

You can use a personal loan for (almost) anything including buying a new or used car, a large purchase such as furniture or electronics, a home renovation or even a holiday. Depending on the type of personal loan you take out the lender may have restrictions for what you can use it for. For example, car loans can only be used to buy vehicles.

PurposeCan you fund with a personal loan?Are there other financing options?
Vehicle purchaseYesIf the vehicle is eligible, opt for a car loan for lower rates. Unsecured personal loans are also an option.
Debt consolidationYesYou can opt for a debt consolidation personal loan or a balance transfer credit card.
Home renovationsYesAs well as an unsecured personal loan, you can also consider a line of credit home loan or construction home loan.
Taking a holidayYesYou can opt for an unsecured personal loan for a holiday.
Business useYesNoSome lenders such as Harmoney let you use personal loans for business purposes, but generally, you will be required to take out a business loan.

What other credit options do I have to consider?

While a personal loan is a viable option for the above scenarios, you also have other financing options to consider. These include:

  • Home equity loans. If you're undertaking home renovations, using the equity from your home can also be an option. Work out the costs of this as well as a personal loan to see which one would be a better option.
  • Business loans. If you require a loan for business purposes you can compare lenders offering loans from $5,000 to $250,000.
  • Credit cards. These can be a good source of ongoing credit and can come with high limits – between $1,000 and $100,000 – that you can use when you don't have the ready money.
  • Balance transfer credit card. If you have debt across a few credit cards or even a personal loan, you can consider a balance transfer credit card. These let you pay 0% interest on the debt for an extended period of time.

Will my loan purpose affect my application?

Yes, it can. For example, if you are applying for debt consolidation you may already appear to be a higher risk than someone who is buying an asset, such as a car, or someone who is investing in their property by undertaking renovations. However, it depends on how the lender assesses your application's risk. Ultimately, your eligibility will come down to whether you meet the lender's application criteria and whether you can afford the loan.

When should I not use a personal loan?

While many loan purposes are acceptable, some are not always advised. Here are some situations where you may want to reconsider your loan application:

  • If you can easily save the money. Want to take a holiday or buy a new lounge, but it isn't urgent? A personal loan may not be the best option. Work out how much your repayments would be and save that amount each month instead. If you can't wait that long to do what you're planning, save instead.
  • If it's a bad investment. Are you thinking of taking out a loan to undertake home renovations or some other investment? Make sure the investment will add value rather than take it away, otherwise you'll be repaying your loan on an idea that lost money.
  • If your income and employment aren't stable. You should not take out a personal loan unless you are in a stable financial position. If there is any reason why you think your income or employment situation might change for the worse, don't apply for a loan.

Picture: Shutterstock

More guides on Finder

Personal Loan Offers

Important Information*
Logo for Harmoney Unsecured Personal Loan
Harmoney Unsecured Personal Loan

You'll receive a fixed rate between 6.99% p.a. and 25.69% p.a. based on your risk profile.
Apply for a loan up to $50,000 and repay your loan over 3 or 5 years terms.

Logo for ANZ Fixed Rate Personal Loan
ANZ Fixed Rate Personal Loan

You'll receive a fixed rate of 10.5% p.a.
Apply for up to $50,000 to use for a variety of purposes without needing to add security. Available to self-employed applicants. Note: These rates are available until 2 February 2021. Credit, eligibility criteria and terms & conditions apply.

Logo for NAB Personal Loan Unsecured Fixed
NAB Personal Loan Unsecured Fixed

You'll receive a fixed rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.

Logo for SocietyOne Unsecured Personal Loan
SocietyOne Unsecured Personal Loan

You'll receive a fixed rate between 6.99% p.a. and 20.49% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.

2 Responses

    Default Gravatar
    NicApril 20, 2016

    Why can’t I use a personal loan to fund software I’m developing independently, not as a business? Do banks find someone who takes out a personal loan to repay debt or travel or whatever less of a risk than someone without debt with a steady income working on a personal project?

      Avatarfinder Customer Care
      ElizabethApril 21, 2016Staff

      Hi Nic,

      If you opt for an unsecured personal loan the way you use your loan amount is up to you. However, lenders will require you to list your loan purpose in the application and this may form part of their decision.

      Hope this helps,


Go to site