When Are Personal Loans a Good or Bad Idea?

[Suba]

As we know, personal loans can often be taken out without collateral and used for any purpose. Although the interest rates (APR) on personal loans are often higher than those on home loans or business loans for small businesses, there are also some good or reasonable ways to use personal loans:
1. Paying off credit card debt. The average credit card interest rate is 24% as of June 2025, while the interest rate on personal loans is only around 12%. So, if you must take out a personal loan, it will save you money.
2. As additional funds for major events, such as weddings or birthday parties. If your funds are insufficient and there are no other better alternatives, you can choose a personal loan with a lower interest rate than a credit card.

However, on the other hand, personal loans are not recommended and are considered a bad idea, such as:
1. Down payments for cars and houses
2. School fees
3. Investing in any instrument
4. As gambling funds

Have you ever taken out a personal loan and what did you use it for?

 

[Springtime]

I do not like borrowing money. The only time I take out a loan is my mortgage loan when I bought my apartment.

 

[Suba]

I do not like borrowing money. The only time I take out a loan is my mortgage loan when I bought my apartment.

Same to you, I've never taken out a personal loan, either offline or online, but as forum members, we need to have extensive knowledge so we can discuss all issues, so there's no need to relate them to our personal lives.

 

[Starmix]

I experienced a personal loan during my first year at work. I was tempted by my friends. The amount was $200 only, but the interest was shocking and I surrendered my ATM card. I hate it, so in the third month I paid all and the manager wasn't happy. I never did it again. It seemed I was losing my dignity. I didn't tell my family. They will get angry at me.

 

[freelancermaria]

I prefer not to take out loans whenever possible. During college, I took out a personal loan to pay for my thesis, and I struggled to pay it back. Because of that, I would like to avoid loans in the future.

 

[King Belieal]

Personal loans are a very bad idea when you don't have a source of income to repay the loan within the stated timeframe.