What can you use a personal loan for?

Personal loans offer something that’s appealing to many borrowers: flexibility. Unlike mortgages or car loans, which specify how you use the funds, many personal loans allow you to spend the money in almost any way you like, with few restrictions. Still, having a plan for the funds you borrow can make all the difference in making your loan work for you.

In this guide, we’ll walk through some of the smart ways to use a personal loan and some of the potential restrictions attached to personal loans.

7 financially smart ways to use a personal loan

Using the funds from a personal loan in a strategic way can be a big step toward financial stability. But before jumping into a personal loan, it’s important to ask yourself if getting a personal loan will help or hurt your bottom line.

As you explore different ways to use personal loan funds, whether for debt consolidation, home improvements, or other needs, consider how each option aligns with your broader financial goals. Generally, the smartest choice is one that reduces your overall debt burden, lowers your interest expenses, and/or puts you on a clearer path toward long-term financial wellness.

Here are some of the ways funding from a personal loan may be used.

1.  Consolidating debt to simplify your finances

If you are drowning in high-interest debt, opting to consolidate your debts through a personal loan could make sense. For example, if you are juggling multiple credit cards, consolidating the debt into a single personal loan could simplify your finances by cutting down on the number of payments on your calendar. 

Additionally, personal loans tend to come with lower interest rates than credit cards. With average credit card interest rates hovering around 25% as of November 2025, according to Forbes, consolidating debt into a personal loan, with average interest rates potentially being less, could lead to significant savings on interest charges. You can check your possible personal loan offers with Rocket Loans℠ here.

Before you jump into a debt consolidation loan, run the numbers to see how much you might save on interest charges. If the savings are worthwhile, moving forward with a debt consolidation loan could help you make headway toward your financial goals.

2.  Revamping your space with home improvement projects

Tackling a major home improvement project could help you increase the value of your home. When it’s time to sell, the right investments could make it easier to sell the home for a higher price point.

In some cases, using a personal loan to finance home renovations can pay off in the long run. Depending on the project, you might be able to recoup some or all the project costs when you decide to sell.

Whether or not you plan on using a personal loan, it’s important to consider which home improvement projects offer the best return on your investment (ROI). Some of the home renovations with the best ROIs include a finished basement, with an estimated 70% ROI according to Angi, and a bathroom remodel, with an estimated 71% ROI, according to the National Association of REALTORS.

Of course, the actual ROI of your project will vary based on your home, location, extent of work, quality of workmanship, contractor rates, and more. But, sometimes, using a home improvement loan for a renovation can pay off.

As you explore this option, consider what projects offer the highest ROI. Also, take the time to get multiple quotes from contractors to accurately assess how much it might cost to bring your vision to life.

3.  Covering emergency expenses

If you can’t cover an unexpected expense, you aren’t alone. Many Americans cannot afford to cover an unexpected expense of $400 or more, according to Empower, and some turn to personal loans to get through tough financial patches.

Life tends to throw financial curveballs your way when you are least expecting them. For example, your HVAC system might need to be replaced in the middle of the summer heat, or a hidden electrical issue might force you to rewire your home immediately. Sometimes, expenses can’t wait until you save up to cover the bill. That’s when a personal loan can come in handy.

Generally, a personal loan allows you to spread out the cost of a big emergency expense into affordable monthly payments. And since personal loans tend to come with lower interest rates than credit cards, they tend to be the better financial option if you are turning to debt.

4.  Managing unexpected medical costs

It’s no secret that medical costs can add up quickly. Even if you have a good medical insurance plan, deductibles and co-insurance costs can lead to surprisingly expensive medical bills.

While some hospitals offer payment plans to qualifying patients, that’s not always an option. Luckily, it’s possible to use a personal loan to cover medical bills that stack into the thousands of dollars.

Using a personal loan to cover your medical bills can help you lock in lower monthly payments spread across multiple years. Plus, personal loans often come with lower interest rates than you would get through your credit card.

5.  Wedding financing to pay for the big day

The cost of saying ‘I do’ might leave your eyes watering. On average, couples spend around $33,000 on wedding expenses as of 2025, according to The Knot.

Some couples have enough saved to pay for the big day upfront, and others receive financial help from family to cover the costs. But many soon-to-be-weds struggle to cover wedding costs. While turning to credit cards is an option, the high interest rates attached could put the couple in a tough financial position at the start of their marriage.

In some cases, using a personal loan to cover wedding expenses is a good idea. Typically, personal loans offer a more affordable way to cover some or all your wedding expenses than credit cards.

6.  Managing moving costs when relocating

Making a big move can take a toll on your finances. Whether you are moving across the country or just across town, the costs can add up quickly. According to Angi.com, local moves can cost anywhere between $250 and $3,500, depending on how much personal property needs to be moved. Long-distance moves can range from $2,700 to $10,000, based on distance and the weight of the items being moved.

Since moves happen for a range of reasons, including medical necessity or job opportunities, there isn’t always time to save for these costs. If you don’t have the funds on hand, opting to lean on a personal loan could allow you to stretch out the cost of a move over several years without facing the sky-high interest rates typically attached to credit card debt.

Before pursuing a moving loan, get some quotes to determine how much it might cost to make your big move.

7.  Financing car repairs that can’t wait

When the dreaded ‘check engine’ light pops up on your dashboard, all you can do is hope that a mechanic doesn’t find a major problem. But if you get bad news from the mechanic, a personal loan offers a quick way to cover the costs. Plus, you’ll be able to spread out the cost of the pressing repair with manageable payments over time.

In contrast to putting the bill on your credit card, personal loans tend to offer relatively low interest rates, which makes the repayment process less painful. Since car issues can strike without warning, it’s helpful to have the option of an auto repair personal loan in your back pocket.

What personal loans can’t be used for

While personal loans can be used for a wide range of reasons, they can’t be used for everything. Most personal loans have a few restrictions on how you can use the funds. A few common things a personal loan can’t be used for include:

• A down payment on a home: Many mortgage lenders prohibit using a personal loan for a down payment on a home.
• Gambling: You cannot use a personal loan for gambling, even if you are gambling legally.
• Illegal activities: Personal loans cannot be used to finance any illegal activity.

If you aren’t sure that your intended purpose is allowed, ask the lender before finalizing your personal loan.

The bottom line: Personal loans should be used wisely

Personal loans offer borrowers an opportunity to fund unexpected purchases, home repairs or consolidate debt, avoiding the high interest rates that often come along with credit cards. You should carefully consider whether a personal loan is right for you and whether the purpose of the loan will benefit you in the short term and the long term. Consolidating higher interest debt and covering emergency expenses are common ways that borrowers use funds from a personal loan.

If you are ready to move forward with a personal loan, you can see what you may qualify for by reaching out to Rocket Loans℠ today.