4 Pros and Cons of Taking Out a Personal Loan in Your 20s

How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

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Student Loan Hero Advertiser Disclosure

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There are moments in life that make you realize you’re well into your 20s — like the first time you blow a lot of money on fine cheese and a nice bottle of wine at the grocery store.

Getting a personal loan is on that list, as well. Although it sounds so adult to take out a personal loan, it’s a situation you might find yourself in before you’re 30.

Before taking out a personal loan in your 20s though, consider the following.

4 pros and cons of taking out a personal loan in your 20s

Not all 20-somethings are created equal — some have better credit histories than others. If that’s the case for you, check out our guide to personal loans for 30-somethings. You’re probably ahead of the game.

If not, take a look at these four pros and cons of taking out a personal loan in your 20s.

1. Pro: You could consolidate your credit card debt

As counterintuitive as it might seem, taking on new debt could help erase your credit card debt. It’s a popular strategy because the best personal loan companies offer lower interest rates than those found on credit cards.

Say you have $15,000 in credit card debt that you’re looking to pay off and your card issuers are charging a 15.00% interest rate. If you decided to pay it off by borrowing that amount from a lender in the form of a personal loan at a 10.00% APR with a shorter term and higher monthly payment, you’d save $11,138, according to our credit card consolidation calculator.

Most importantly, you’d pay off your creditors and push your credit card balance back to zero. Although you’d still have $15,000 in debt, you’d enjoy other benefits of personal loans. For example:

  • Unlike revolving credit, personal loans are paid in installments and therefore have an end date.
  • You’d make one monthly payment to one lender instead of to multiple credit card companies.
  • You’d (ideally) pay less interest over the life of the loan.

2. Con: You might be tempted to misuse the loan

Personal loans can be used for almost any purpose, with few restrictions from lenders. Upgrade, for example, allows you to use a personal loan for most expenses, except to cover post-secondary education costs, investments, illegal activities, or gambling.

There are many ways you could use your loan amount, but not all of them are wise. Here are four types of expenses you probably should pay for in a different way.

  • Everyday bills: You might think a personal loan is a perfect solution to cover the bare necessities while you get on your feet. Instead of taking out a loan though, consider utilizing community support programs to avoid putting yourself in the situation where you’ll rack up debt for your basic needs.
  • Big purchase: Whether you’re eyeing a flat-screen TV or a four-wheel-drive car, paying for a big-ticket item with a personal loan is almost always a bad idea. That’s because you’re paying the sticker price for the item, plus the interest rate on your loan, making it a much more expensive purchase.
  • Vacation: Maybe you see a personal loan as paving the way for the dream vacation you’ve always wanted. However, you have to consider the added cost of the trip after accounting for interest. Budgeting and setting a savings goal might not be as immediately gratifying as receiving a lump sum from a lender, but it’s the better way to go.
  • Wedding: The average American is getting married in their late 20s, so you might not be too far from getting hitched. If that’s the case, consider cutting your guest list or receiving help from family members to cover costs for the big day.

3. Pro: It could help you invest in yourself

Although not all expenses should be paid for with a personal loan, there are plenty of reasonable uses for one.

For instance, at this stage in your career, perhaps you’re considering one of the following expensive life changes:

  • Relocating: Maybe you aced an interview for an out-of-state job only to find out that you’ll have to pay for your moving. Borrowing money to cover some or all of the costs could be a smart idea if you take into account whether your new salary is enough to help you repay the loan.
  • Continuing your education: You may have decided to take out student loans to pay for your undergraduate and post-graduate degrees. But you could use a personal loan to pay for a certification, class, or conference that you need to be promoted at work. Before resorting to borrowing, however, find out if you can get your employer to pay for the program or if you can work out a payment plan with the organization offering it.
  • Starting a business: If you have excellent credit, you might find that a personal loan is the cheapest way to start funding your small business. Before signing on the dotted line, however, ensure you have a repayment plan that isn’t contingent on your business success.

4. Con: It could come with high interest rates

This is the real catch of it all: To benefit from personal loans — like other installment loans — you need to have good-to-great credit, plus a satisfactory debt-to-income ratio.

Without these marks of a strong personal loan application, you could be quoted interest rates as high as 35.00% — and that’s from reputable lenders.

There are plenty of predatory lenders offering personal loans at much higher rates with similarly short repayment terms. That makes the loans risky to borrow and difficult to repay.

If you’re considering borrowing before your 30th birthday, put yourself in your best possible position by improving your credit score and prequalifying for a personal loan. Then, and only then, can you enjoy the advantages of a personal loan.

Interested in a personal loan?

LendingTree allows you to compare rates from multiple lenders by filling out one easy form. How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

RATES (APR)loan amount
5.99% – 19.16%1 $5,000 to $100,000
7.86% – 35.99% $1,000 to $50,000
5.94% – 35.97%* $1,000 to $50,000
99.00% – 199.00%2 $500 to $4,000
5.99% – 24.99%3 $5,000 to $40,000
7.99% – 29.99%4 $7,500 to $40,000
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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 18.82% APR (with AutoPay). SoFi rate ranges are current as of March 19, 2020 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your creditworthiness, years of professional experience, income and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
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  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
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Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
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  3. OppLoans performs no credit checks through the three major credit bureaus Experian, Equifax, or TransUnion. Applicants’ credit scores are provided by Clarity Services, Inc., a credit reporting agency.

  4. Based on customer service ratings on Google and Facebook. Testimonials reflect the individual’s opinion and may not be illustrative of all individual experiences with OppLoans. Check loan reviews.

  5.  

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  1. The loan terms presented are not guaranteed and APRs presented are estimates only. To obtain a loan you must submit additional information and documentation and all loans are subject to credit review and our approval process. The range of APRs is 7.99% to 29.99% and your actual APR will depend upon factors including your credit score, usage and history, the requested loan amount, the stated loan purpose, and the term of the requested loan. To qualify for a 7.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available. All loans are made by Cross River Bank and MetaBank®, N.A., Members FDIC.
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Upgrade Bank Disclosures

Personal loans made through Upgrade feature APRs of 5.94%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Accept your loan offer and your funds will be sent to your bank or designated account within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes the transaction. From the time of approval, funds should be available within four (4) business days. Funds sent directly to pay off your creditors may take up to 2 weeks to clear, depending on the creditor. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.