Get exclusive money-saving offers and guides
Straight to your inbox
By signing up, you agree to the Finder
Privacy & Cookies Policy
and
Terms of Use, Disclaimer & Privacy Policy.
Loan Types
I Want
What can I use a personal loan for?
Here is what you should (and shouldn't) use a personal loan for.
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.
| Purpose | Can you fund with a personal loan? | Are there other financing options? |
|---|---|---|
| Vehicle purchase |  | If the vehicle is eligible, opt for a car loan for lower rates. Unsecured personal loans are also an option. |
| Debt consolidation | | You can opt for a debt consolidation personal loan or a balance transfer credit card. |
| Home renovations | | As well as an unsecured personal loan, you can also consider a line of credit home loan or construction home loan. |
| Taking a holiday | | You can opt for an unsecured personal loan for a holiday. |
| Business use |  | Some 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.
What is next?
Picture: Shutterstock
More guides on Finder
-
How to start a mobile app business
Learn the key considerations when it comes to starting and growing your smartphone app company.
-
Pepper Money
Pepper Money is an Aussie non-bank lender that offers a vast range of personal loans and home loans to customers Australia-wide. Find out more here.
-
Handypay Personal Loan
Find out more about Handypay's personal loans for home improvements. Personalised rates start from 6.75% p.a. on terms from 1 to 7 years.
-
Pepper Money No Fee Personal Loan Review
Find out more about Pepper Money's no fee personal loan and benefit from a competitive rate from 6.95% p.a., zero fees and loan terms of up to 7 years.
-
Brighte Personal Loan
Looking to renovate your home? Find out more about Brighte's personal loan for home improvements and ways in which it may be able to benefit you.
-
Free Loan Agreement Templates (Australia)
Learn how to write a loan agreement and find out where you can get free legal templates.
-
How will proposed “simpler credit” rules affect Australian borrowers?
The federal treasurer has announced plans to make it easier to get credit cards, home loans and personal loans. But it's borrower beware.
-
Now Finance Secured Personal Loan review
Get rewarded for an excellent credit score with a Now Finance personalised rate secured personal loan. Rates vary between 5.95% p.a. and 15.45% p.a. Apply today.
-
Finder Awards 2020 Best Risk Based Personal Loans
Winner, finalists and methodology for Finder Awards 2020 Best Risk Based Personal Loans.
-
Alex Personal Loan review
Alex is a neobank lender specialising in personalised rate personal loans. Find out more about Alex's personal loans and what fees and features are involved.
Personal Loan Offers
Important Information*
Ask an Expert
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?
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,
Elizabeth