Unlike any other types of loans, you can get a personal loan for anything. The best personal loans come with low interest rates and make borrowing affordable. While the low cost and versatility of these types of loans can be considered a plus, they can also lead to you borrowing money in the situations that don’t warrant taking on a new debt.

Many articles out there would tell you the scenarios in which you should take a personal loan, but in the end, you have to be smart and figure out when to take a personal loan. So, here we have kept it simple and explained the only three times when it is in your best interest to take a personal loan.

  1. When you are having emergency expenses that are required to be paid immediately: You may get into a situation where you don’t have enough funds to meet an expense, but if you do not pay there are steep consequences. Such situations include:
  • Costly repairs in your car, which have to be made in order to use the car
  • Medical bills that has to be paid to keep your credit score in tact
  • Home repairs needed so that your house is in a livable condition

A personal loan is not the most efficient way to pay for these expenses; the most optimal way would be your emergency fund. But at times expenses are bigger than what you can afford and you don’t have any other option than to turn to an online personal loan. It is one solution that must not cost you too much in interest.

People take up online personal loans from personal loan apps for many different kinds of reasons like for vacations, weddings, to purchase big-ticket electronics, etc. Just because other people use personal loan apps for that reasons, it doesn’t make that a good idea.

  1. When you can consolidate your debt at a lower interest rate: Debt consolidation is one of the top good reasons for getting a personal loan. Many consumers use personal loans to consolidate credit card debt. However, you can get a personal loan to pay off different high-interest loans that you may have.

Here’s how using personal loans for consolidating debts works:

  • You take a personal loan for debt consolidation. You get a loan to pay off the complete debt you have
  • You pay off all your existing debt upon approval of the personal loan
  • Now you have only one payment to take care of month on month instead of many different payments. Also, you save money on interest
  • The new loan’s term gives you a set timeline for paying your debt off
  • This can help you get on track in case your previous debt was on revolving lines of credit like credit cards

When you are planning to consolidate your debt, make sure the amount of money you save is greater than any loan fees you are required to pay like origination fees.

Also, for any debt that you could realistically pay off within one year, you must consolidate it with one of your top balance credit cards. Your card may have 0% interest and several offer periods that might last 15 months or longer.

  1. When you can make use of personal loan and make money: Sometimes you come across an opportunity wherein you can make money by spending some, but you don’t have the money for investing. For such cases, personal loans can be a wise decision. Below are a few examples of such situations:
  • You are investing in a business expansion that is bound to lead to greater profits
  • You are remodeling your home to boost its valuation
  • You are taking a learning course that improves your career prospects

You are definitely taking a calculated risk here, and there is sure a chance where you can lose your money. A business expansion doesn’t have to be successful. Home renovations may not increase your home’s value. And a learning course might not lead to better career opportunity. If things don’t pan out as per your plan, you might be stuck paying your loan off.

But, if you have done your homework and you think by getting those personal loan funds there’s a good chance your opportunity will work out, then the wise decision may be to pull the trigger on the loan application.


There are many potential scenarios where taking a personal loan is the right decision. To know if you are making the right decision, ask yourself these three questions before applying for a personal loan:

  • Am I going to save money in future by consolidating my debts?
  • Do I have to absolutely pay for this urgent expense?
  • Will this loan really give me an opportunity to make more money than what I am borrowing?

If your answer to any of the above questions is yes, then you can take your decision to take a personal loan.