What can I use a personal loan for?

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

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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 Yes If the vehicle is eligible, opt for a car loan for lower rates. Unsecured personal loans are also an option.
Debt consolidation Yes You can opt for a debt consolidation personal loan or a balance transfer credit card.
Home renovations Yes As well as an unsecured personal loan, you can also consider a line of credit home loan or construction home loan.
Taking a holiday Yes You can opt for an unsecured personal loan for this purpose.
Business use YesNo 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.

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Important Information*
Logo for Citi Personal Loan Plus
Citi Personal Loan Plus

You'll receive a variable rate between 9.99% p.a. and 17.99% p.a. (9.99% p.a. to 17.99% p.a. comparison rate) based on your risk profile
A credit limit up to $75,000 that you can continue to draw down over terms up to 5 years. Note: No establishment fee and no monthly account service fees apply if you apply and are approved before 31 March 2020.

Logo for RateSetter Unsecured Personal Loan - 3yr Variable
RateSetter Unsecured Personal Loan - 3yr Variable

You'll receive a variable rate between p.a. and 16.40 p.a. based on your risk profile
A flexible loan with amounts from $2,001 and terms starting from 6 months. Interest and comparison rates calculated for a loan term of 3 years.

Logo for Harmoney Unsecured Personal Loan
Harmoney Unsecured Personal Loan

You'll receive a fixed rate between 6.99% p.a. and 28.69% p.a. based on your risk profile.
Apply for a loan up to $70,000 and repay your loan over 3 or 5 years terms.

Logo for NOW FINANCE Personal Loans
NOW FINANCE Personal Loans

You'll receive a fixed rate between 8.95% p.a. and 16.95% p.a. based on your risk profile
Apply for loans from $5,000 and get a dedicated loan manager. No security required.

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2 Responses

  1. 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,


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