The 5 Worst Reasons to Get a Personal Loan

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worst reasons to get a personal loan
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If you ask people their opinions on personal loans, you’ll get a variety of answers. Some think they’re a good idea since you can pay off or consolidate debt. Others believe they could put you in a worse financial situation since you could lose an asset or get stuck with high interest rates.

But there are some situations where the majority would agree it’s not a good idea to get a personal loan. These are the worst reasons to get a personal loan.

1. Paying for your wedding

personal loan for wedding

With the average wedding costing $33,391, according to The Knot 2017 Real Weddings Study, it’s hard for many people to afford their dream affair. To cover the costs, you might consider taking out a personal loan, but going into debt isn’t the best way to start off a marriage.

The cost isn’t a necessary one, and you’ll end up paying more in the long run with interest charges. Your loan doesn’t help to reduce your debt like it would if you were consolidating credit card balances. Instead, it adds on to your existing debt.

You should only plan a wedding that you can afford out of pocket. You could also cut costs before resorting to a loan. That could mean reducing the number of people you invite, opting for a buffet option, or postponing the wedding until you can afford it.

2. Investing in the stock market

personal loan for investingSome swear that investing in the stock market helped them amass a fortune. That’s how Grant Sabatier said he became a millionaire by 30. But he used money made from side hustling and savings to invest, not a loan.

The risk of taking out a personal loan with the intent of investing the funds is that you could lose all the money. Add interest charges on top of your personal loan, and you’re putting a lot of money on the line.

If you invest your savings or extra money you have on the side, you could lose it all, but at least you won’t be on the hook for paying interest.

3. Covering daily expenses

personal loan for living expenses

Unfortunately, 49% of Americans live paycheck to paycheck, and 61% don’t have enough cash to cover six months of living expenses, according to a 2017 GOBankingRates survey. But that’s no reason to take out a personal loan.

With most loans you take out, you’ll repay them in monthly installments. If you’re already paying for rent, student loans, and other costs, adding a personal loan could make it difficult for you to get out of debt or build savings.

Rather than take out debt to cover living expenses, focus on how you can cut costs. For example, can you reduce how much you spend on eating out? Can you live in a cheaper home? Figure out what your absolute necessities are and learn to create a budget around those costs before considering a loan.

4. Taking a vacation

personal loan for vacation

While taking a vacation gives your mind and body time to relax and reboot, you should never take out a loan to cover one. You might enjoy sipping margaritas, getting massages, and lounging by your private pool, but coming home to a mountain of debt will make that getaway buzz quickly disappear.

Amazingly, 74% of Americans surveyed have gone into debt from a vacation, according to a 2017 report by LearnVest. Worse, vacationers accrued an average $1,108 in debt from their time off. But like a wedding, you should only spend the money you saved up to pay for travel. After all, it isn’t a necessary expense.

Instead, set aside money in your budget to plan for a vacation. And avoid some common travel spending mistakes such as buying food at the airport.

5. Paying medical bills

personal loan for medical bills

It’s no surprise that a huge financial headache for many people is the cost of health care. In the U.S., 29% of adults have trouble paying their medical bills, according to a 2017 Kaiser Family Foundation study. So, you might be tempted to borrow some money to cover the unexpected cost if you get hurt or sick. But it’s one of the worst reasons to get a personal loan.

There are many other steps you should take first if faced with a high medical bill. First, review any bills for errors. You could owe less than you thought.

If you can’t afford your bills, try negotiating with your medical provider. They might be willing to charge you less or put you on a payment plan. This could help you avoid paying interest on your debt or reduce your overall cost.

Should you take out a personal loan?

Although there are many situations where taking out a loan is a bad idea, it’s important not to bash the idea entirely. There are many reasons personal loans are a good idea and can actually help reduce your debt. Just be careful not to use a loan to cover superfluous costs.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 6.58% APR to 14.87% APR (with AutoPay). Variable rates from 6.275% APR to 12.575% APR (with AutoPay). SoFi rate ranges are current as of July 16, 2018 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 credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.275% APR assumes current 1-month LIBOR rate of 2.10% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. 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. 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)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.73% – 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
6.28% – 14.87%1$5,000 - $100,000
Check rate nowon SLH's secure site
6.87% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
4.99% – 29.99%$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%2$5,000 - $50,000Visit Citizens
15.49% – 34.49%$2,000 - $25,000Visit LendingPoint
5.99% – 35.89%$1,000 - $40,000Visit LendingClub
5.49% – 18.24%$5,000 - $75,000Visit Earnest
9.95% – 35.99%$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.