The Best and Worst Reasons to Apply for a Personal LoanPersonal loans are an accessible way to borrow money that you can then use any way you want. However, not all loans end up benefiting you in the long run. Personal loans work best when you’re using them to make investments in your life, either to give yourself the ability to make more money, or to save money in the future. Before you take out a loan, you should carefully consider what you’re using it for and if that investment will pay off. To help you get started, here are four of the best reasons to apply for a personal loan, along with four of the worst.

The best reasons to apply for a personal loan

Debt consolidation: When you’re paying off debts with high APRs and you find a personal loan offering a lower APR, it makes sense to consolidate your debt with it because you’ll ultimately pay less money to your creditors. Try to make sure that new loan has a similar (or shorter) repayment term to your old loans if you can afford to, as a longer term means you’ll end up paying more in interest. Alternatively, you may also want to look into consolidating your debt with a balance transfer credit card. That’s because balance transfer credit cards provide you with long 0% intro APRs on your transferred balances, allowing you to pay off the debt interest free. It should be noted that you can only transfer credit card debt to a balance transfer credit card, and most cards charge a balance transfer fee of 3% to 5% of the transferred amount (note that there are a few cards that charge no balance transfer fees), but this one-time fee is likely a lot lower than the ongoing interest you’re paying on your current credit card, which means you’ll still come out money ahead. Use our free balance transfer calculator to determine if one of the best balance transfer credit cards is the right option for you.

Repairing your house: If you own a home, it’s probably one of your most valuable possessions. In order to protect your home’s value and keep it pleasant to live in, you need to regularly maintain and repair it. For people who have been putting off maintenance because of high costs, personal loans can help you handle expensive renovations, and can be a good financial decision if the maintenance they’re doing will help them avoid more serious repairs down the road. Similarly, you may choose to update parts of your house, like modernize the kitchen. If you choose to make any updates, make sure they add more value to the house and aren’t custom updates that might make your home hard to sell down the road.

Buying green appliances: In general, appliances that are run down or over 15 years old should be put out to pasture. Not only because they lack the cool, shiny features of current appliances, but also because they’re typically half as energy efficient. Applying for a personal loan to outfit your home or life with green appliances can save you money on electric and gas bills over the years, and those savings will start right when you get your new hardware installed. Just be careful if your new appliances are “smart” devices that connect to the Internet, as you’ll need to take steps to make sure they’re secure.

Career development: Using a personal loan to get additional job training can be a valuable investment in your future earning potential, as having in-demand skills will help you get promoted or land a high-paying job. Realistically, what you’re learning plays a big factor as well, as a certification from a reputable coding bootcamp is more likely to get you better job offers compared to completing an online Quickbooks course, for example. Before you commit to taking out a loan to learn new skills, make sure you research what career opportunities those skills may open for you.

The worst reasons to apply for a personal loan

Weddings and vacations: Weddings and vacations both fall into the same category of “experiences.” While studies have shown that spending money on experiences does lead to feelings of happiness, taking out a loan just to fund an exotic vacation or a lavish wedding is not a great financial decision. Fun experiences can’t appreciate in monetary value or continuously reduce your expenses elsewhere, they just happen, you enjoy them and then they’re over. If you really want to have a big wedding or a luxury vacation, you’ll have to weigh its sentimental value against the debt it will bring. It should be noted that if you want to book a vacation or plan a wedding and don’t have the funds to pay upfront, you can use a card offering a 0% intro APR on purchases to fund it — just make sure you pay the balance off before the 0% intro APR runs out, or you’ll be stuck paying interest just as you would with a personal loan. Want to learn more? Our reviews of the best low APR credit cards can help. We also have a list of the best credit cards for wedding expenses that you may find helpful.

Buying a car: You could apply for a personal loan to buy a car, but you would probably pay much less interest if you got an auto loan instead. Auto loans are secured loans that use the car you’re buying as collateral, while most personal loans are unsecured loans, which aren’t backed by any collateral. Since secured loans offer lenders less risk than unsecured loans, as they can repossess your car if you fail to pay, your APR for an auto loan will likely be lower than your APR for a personal loan. Note that there are some personal loan services which do offer secured auto loans, such as OneMain Financial, but you’ll need to do some comparison shopping to make sure that you’re getting the best quote.

Investing in stocks: This may seem counter-intuitive, considering you’re using the personal loan to literally make an investment, but taking out a loan just to invest in stocks isn’t a great idea for most people. Speculative trading is similar to gambling, which is definitely something you shouldn’t do with a personal loan (and which may actually violate the loan service’s terms of use), and if you use your loan to make long-term investments, the APR will diminish your returns or wipe them out completely. Long-term investing in the stock market can be a good idea, but it doesn’t make monetary sense to take out a loan to do it.

Covering everyday expenses: Having to apply for a personal loan to cover your everyday expenses may be a sign that you are living beyond your means. Rather than take out a personal loan and potentially wind up in a loan cycle, you should probably take a hard look at your finances and create a budget instead. If you still need to borrow a bit of money before your next paycheck, a credit card with a 0% APR intro term would let you do so while avoiding interest, and would likely give you lower minimum payments, as well.

Have a great idea for how you can use a personal loan to improve your life? Find the best lender for your needs by reading our in-depth personal loan reviews, and follow our blog for more advice on how to make your personal loan work for you.