Even if you have life figured out by the time you’re in your 40s, you might find yourself in need of some extra cash. Taking out a personal loan, then, could be an option for you.
But before you borrow, consider the pros and cons of taking on debt as you enter this next phase of your life.
5 pros and cons of taking out a personal loan in your 40s
Everyone’s financial situation is unique, especially if you have a family to support. But you should be able to relate to at least a few of these pros and cons of taking out a personal loan in your 40s.
1. Pro: Consolidating and paying off debt
If you’re behind on your credit cards, you’re not alone. In fact, the average person age 40 and older has between $8,200 and $9,100 in credit card debt, according to ValuePenguin*.
No matter your debt type, paying it off with a personal loan could be a solution if you secure a lower interest rate on the loan than what you’re paying now. But you’ll also need to break bad money habits that put you in the red in the first place.
Say you racked up a ton of credit card debt for unnecessary purchases. Unless you stop buying things you can’t afford, consolidating your debt is only a temporary solution. You’re better off using the card to pay routine bills and nothing else — or cutting it up altogether.
Other benefits of consolidating your debt via a personal loan include:
- Choosing your new lender
- Making one monthly payment
- Agreeing to a repayment term with a specific end date
2. Con: Trying to catch up on investments
You might be tempted to borrow money so that you can invest in stocks, bonds, and the like. After all, you might see retirement on the horizon.
But beware of this strategy; it’s one of the worst reasons to take out personal loans.
Look at it this way: Any amount you borrow via a personal loan and invest in the stock market could lose value or, worse, disappear altogether. Imagine having to pay back the original amount — plus interest — without any investment earnings at your disposal.
Instead of borrowing money, consider other options for making investments, including:
- Maxing out your 401(k) contribution at work
- Learning how to invest with $100 or less of capital
- Meeting with a financial planner to discuss your long-term goals
3. Pro: Tackling necessary home improvements
There are many ways to pay for emergency repairs on your house.
A personal loan could be an attractive option if you score a low fixed rate without having to put up collateral. But you’d need to have an excellent credit history to snatch these perks.
An unsecured personal loan for home improvements is only wise if the project is necessary in the moment. Home repairs involving electricity, sewage, or fumes qualify.
For less-urgent home projects, such as refinishing your hardwood floors, avoid borrowing if you can. Instead, use our simple savings calculator to gauge how long it’ll take you to budget for the funds you need.
4. Con: Covering big (but negotiable) bills
The blessing and curse of personal loans are that you could borrow money quickly and easily for an expense you didn’t see coming. But borrowing should never be taken lightly; it should be treated more as a last resort.
Take medical bills as an example. Let’s say you or your dependents experience a health scare with unforeseen costs. Talk with your health care provider and see if you could negotiate your bill, or at least enroll in a payment plan that makes repayment easier.
The same goes for an unexpected tax bill. Instead of taking out a personal loan, consider alternatives to covering your tax bill, such as requesting an extension on your payment deadline or applying for a stalled repayment plan.
5. Con: Making midlife-crisis purchases
The ease of signing up for personal loans might inspire you to pursue a big purchase. Maybe that big-screen TV, small coupe, or speedboat caught your fancy but is outside of your budget.
In the case of wants versus needs, it’s always better to save up cash than rack up debt for a purchase that can wait.
After all, you don’t want to spend the next decade worrying about money as you’re nearing retirement thanks to splurges you made to satisfy a midlife crisis.
Your 40s are a time to set yourself up for the future and, perhaps, prepare your children for theirs. It’s natural to pine after a big purchase along the way. Just ensure you don’t ruin your finances to make it.
*ValuePenguin is an affiliate of LendingTree, Student Loan Hero’s parent company.
Interested in a personal loan?Here are the top personal loan lenders of 2019!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.
†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com
**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|5.74% – 16.99%1||$5,000 - $100,000|
|7.54% – 35.99%||$1,000 - $50,000|
|7.99% – 35.89%*||$1,000 - $50,000|
|5.99% – 24.99%2||$5,000 - $35,000|
|5.99% – 29.99%3||$7,500 - $40,000|
|6.79% – 20.89%4||$5,000 - $50,000|
|9.99% – 35.99%5||$2,000 - $25,000|
|6.95% – 35.89%6||$1,000 - $40,000|
|6.99% – 18.24%7||$5,000 - $75,000|
|9.95% – 35.99%8||$2,000 - $35,000|