Summertime is finally here — and all those bright, blue days can leave us hankering to spend money in a variety of ways.
But which of those expenditures are good investments worth going into some debt for, and which should be avoided if possible? Here are some common reasons people take out personal loans and whether or not they’re advisable.
1. Using a personal loan to go on summer vacation
Given that 72% of us skipped summer vacation last year due to the pandemic, this year we might be tempted to take on an especially lavish trip to make up for lost time. And indeed, a small percentage of people do take out holiday personal loans to pay for vacation-related expenses.
But that doesn’t necessarily mean it’s a good idea. While personal loan debt does tend to have a lower interest rate than the average credit card, which hovers around 20% APR, it’s still debt. And it still means you’re paying more over time for a purchase that’s not going to earn you back any equity or profit. (Unless you write the next “Eat, Pray, Love” or something.)
The most ideal scenario: Saving up enough cash ahead of time that you can pay for your vacation out of pocket. But it’s been a tough year and this sunshine — combined with the relative freedom offered by increased access to vaccines — is intoxicating.
So if you have your heart set on jetsetting regardless of the financial consequences, a personal loan might be a better option than going into high-interest credit card debt along the way.
2. Using a personal loan to fund your wedding
According to data from The Knot, June is the third-most popular month to get married, trailing closely behind October and September. And that makes sense: For those of us who live in northerly climes, the first summer month might be an ideal time for a dreamy outdoor ceremony.
What’s more, many couples decided to postpone — though not cancel — their nuptials due to pandemic restrictions. Looks like 2021 is a great year to get married. But is it a great year to take out a personal loan to cover the costs?
Per the same study from The Knot, the average wedding cost about $28,000 in 2019 (2020’s numbers were atypically low likely due to the pandemic) — and often more, depending on where you’re getting married.
That’s a pretty penny to save up in cash. It makes sense that about 1% of people who take out personal loans do so to pay for wedding-related expenses. But a smarter idea might be to cut down on the ceremony as a whole.
Some costs are unavoidable, of course, but DIYing your invitations, decorations, flowers and other small touches can help make a dent, as can keeping the guest list fairly short!
3. Using a personal loan to buy a new car
Summer means road trip season is upon us. But is using a personal loan to buy a car a good idea?
According to data from LendingTree, about 10.4% of the people who inquired about personal loans recently did so to finance the purchase of a car or home. Given the availability of secured auto loans — which generally carry lower interest rates and are readily available at just about any car dealership — why would anyone do this?
Well, there are some benefits to paying for a car with a personal loan. For one thing, personal loans don’t require down payments in the way that auto loans do — and you’ll also have the freedom to purchase any kind of vehicle you want. (Auto loans can sometimes come with stipulations as to the age and condition of the vehicle, making them a bad choice for those hoping to finance and fix up an old classic.)
However, because they’re unsecured loans — meaning the lender can’t repossess your vehicle if you fail to make your payments — personal loans are both more difficult to qualify for and more costly than dedicated auto loans. For most borrowers in the car market, a secured auto loan is probably a better bet.
4. Using a personal loan to fix up the house
Now that sunny days are here to stay, you might be noticing just how much havoc Jack Frost wreaked on your property over the winter.
While personal loans do involve paying interest — sometimes as much as 35% or more — if you have good or excellent credit, you might be able to score a low interest rate. And if the improvements are ones that increase the value of your home, you might even see that money come back to you in the form of equity over time.
But it’s important to make sure you can afford to take on the debt of those improvements in the short term rather than banking on long-term returns. They’re not guaranteed!
5. Using a personal loan to get your finances in order
Tax season is officially behind us, and some of us might be enjoying a return — or already dreading next year’s mid-April mess.
No matter how your filing adventure turned out, if you’re struggling with multiple credit cards or other debts, a personal loan can be a smart way to simplify things — and maybe even save some money in the long run.
Here’s how it works. You take out a new personal loan in an amount that covers your total debt. You use the money to pay off what you owe, and then make regular, timely payments toward one new debt: the personal loan itself.
Doing so can make your life easier, since you won’t be trying to track down multiple bills each month, and may even save you money over time depending on the interest rates of your existing loans.
Just make sure you read the fine print and understand how much interest you’ll pay on the personal loan — because even though they can have lower interest rates than credit cards, they still aren’t free.
Happy summer!
Key findings:
- Alaska has become the leader in personal loans used for major purchases as well as wedding and vacation expenses.
- Southern states such as Georgia, Mississippi and Louisiana are more likely to use personal loans for business expenses.
- North Dakotans are least likely to use personal loans for home and auto financing; down considerably from 2020, as previously over 10% of personal loans were used for this.
1. Alabama
- Card Refinancing & Debt Consolidation 33%
- Major Purchase 6%
- Home Improvement 8%
- Vacation & Wedding Expenses 3%
- Business Expenses 7%
- Home & Auto Financing 12%
- Medical Expenses 5%
- Moving & Relocation 3%
- Other 24%
2. Alaska
- Card Refinancing & Debt Consolidation 32%
- Major Purchase 9%
- Home Improvement 6%
- Vacation & Wedding Expenses 5%
- Business Expenses 4%
- Home & Auto Financing 11%
- Medical Expenses 4%
- Moving & Relocation 5%
- Other 25%
3. Arizona
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 6%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 5%
- Home & Auto Financing 10%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 25%
4. Arkansas
- Card Refinancing & Debt Consolidation 30%
- Major Purchase 6%
- Home Improvement 8%
- Vacation & Wedding Expenses 3%
- Business Expenses 7%
- Home & Auto Financing 11%
- Medical Expenses 5%
- Moving & Relocation 5%
- Other 27%
5. California
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 5%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 6%
- Home & Auto Financing 10%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 25%
6. Colorado
- Card Refinancing & Debt Consolidation 39%
- Major Purchase 6%
- Home Improvement 5%
- Vacation & Wedding Expenses 2%
- Business Expenses 5%
- Home & Auto Financing 10%
- Medical Expenses 5%
- Moving & Relocation 5%
- Other 23%
7. Connecticut
- Card Refinancing & Debt Consolidation 44%
- Major Purchase 4%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 4%
- Home & Auto Financing 10%
- Medical Expenses 3%
- Moving & Relocation 4%
- Other 22%
8. Delaware
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 5%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 5%
- Home & Auto Financing 12%
- Medical Expenses 4%
- Moving & Relocation 3%
- Other 23%
9. Florida
- Card Refinancing & Debt Consolidation 37%
- Major Purchase 6%
- Home Improvement 7%
- Vacation & Wedding Expenses 2%
- Business Expenses 7%
- Home & Auto Financing 10%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 23%
10. Georgia
- Card Refinancing & Debt Consolidation 33%
- Major Purchase 5%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 8%
- Home & Auto Financing 11%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 24%
11. Hawaii
- Card Refinancing & Debt Consolidation 43%
- Major Purchase 3%
- Home Improvement 4%
- Vacation & Wedding Expenses 4%
- Business Expenses 3%
- Home & Auto Financing 10%
- Medical Expenses 3%
- Moving & Relocation 4%
- Other 26%
12. Idaho
- Card Refinancing & Debt Consolidation 39%
- Major Purchase 7%
- Home Improvement 4%
- Vacation & Wedding Expenses 3%
- Business Expenses 4%
- Home & Auto Financing 10%
- Medical Expenses 5%
- Moving & Relocation 3%
- Other 25%
13. Illinois
- Card Refinancing & Debt Consolidation 39%
- Major Purchase 5%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 6%
- Home & Auto Financing 11%
- Medical Expenses 4%
- Moving & Relocation 3%
- Other 23%
14. Indiana
- Card Refinancing & Debt Consolidation 34%
- Major Purchase 6%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 5%
- Home & Auto Financing 12%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 25%
15. Iowa
- Card Refinancing & Debt Consolidation 33%
- Major Purchase 5%
- Home Improvement 8%
- Vacation & Wedding Expenses 3%
- Business Expenses 5%
- Home & Auto Financing 12%
- Medical Expenses 4%
- Moving & Relocation 4%
- Other 26%
16. Kansas
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 5%
- Home Improvement 6%
- Vacation & Wedding Expenses 2%
- Business Expenses 5%
- Home & Auto Financing 11%
- Medical Expenses 6%
- Moving & Relocation 3%
- Other 24%
17. Kentucky
- Card Refinancing & Debt Consolidation 31%
- Major Purchase 6%
- Home Improvement 7%
- Vacation & Wedding Expenses 4%
- Business Expenses 5%
- Home & Auto Financing 12%
- Medical Expenses 4%
- Moving & Relocation 4%
- Other 27%
18. Louisiana
- Card Refinancing & Debt Consolidation 27%
- Major Purchase 6%
- Home Improvement 8%
- Vacation & Wedding Expenses 4%
- Business Expenses 8%
- Home & Auto Financing 12%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 27%
19. Maine
- Card Refinancing & Debt Consolidation 39%
- Major Purchase 6%
- Home Improvement 8%
- Vacation & Wedding Expenses 2%
- Business Expenses 4%
- Home & Auto Financing 11%
- Medical Expenses 3%
- Moving & Relocation 4%
- Other 22%
20. Maryland
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 5%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 7%
- Home & Auto Financing 9%
- Medical Expenses 4%
- Moving & Relocation 4%
- Other 23%
21. Massachusetts
- Card Refinancing & Debt Consolidation 43%
- Major Purchase 5%
- Home Improvement 5%
- Vacation & Wedding Expenses 3%
- Business Expenses 4%
- Home & Auto Financing 9%
- Medical Expenses 4%
- Moving & Relocation 4%
- Other 23%
22. Michigan
- Card Refinancing & Debt Consolidation 34%
- Major Purchase 6%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 6%
- Home & Auto Financing 12%
- Medical Expenses 3%
- Moving & Relocation 4%
- Other 24%
23. Minnesota
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 6%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 5%
- Home & Auto Financing 9%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 24%
24. Mississippi
- Card Refinancing & Debt Consolidation 28%
- Major Purchase 5%
- Home Improvement 9%
- Vacation & Wedding Expenses 3%
- Business Expenses 8%
- Home & Auto Financing 12%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 26%
25. Missouri
- Card Refinancing & Debt Consolidation 34%
- Major Purchase 6%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 5%
- Home & Auto Financing 12%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 26%
26. Montana
- Card Refinancing & Debt Consolidation 36%
- Major Purchase 6%
- Home Improvement 5%
- Vacation & Wedding Expenses 2%
- Business Expenses 3%
- Home & Auto Financing 12%
- Medical Expenses 4%
- Moving & Relocation 4%
- Other 27%
27. Nebraska
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 6%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 4%
- Home & Auto Financing 10%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 24%
28. Nevada
- Card Refinancing & Debt Consolidation 39%
- Major Purchase 5%
- Home Improvement 4%
- Vacation & Wedding Expenses 3%
- Business Expenses 7%
- Home & Auto Financing 9%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 25%
29. New Hampshire
- Card Refinancing & Debt Consolidation 43%
- Major Purchase 7%
- Home Improvement 6%
- Vacation & Wedding Expenses 2%
- Business Expenses 3%
- Home & Auto Financing 10%
- Medical Expenses 4%
- Moving & Relocation 4%
- Other 22%
30. New Jersey
- Card Refinancing & Debt Consolidation 43%
- Major Purchase 5%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 5%
- Home & Auto Financing 9%
- Medical Expenses 4%
- Moving & Relocation 3%
- Other 21%
31. New Mexico
- Card Refinancing & Debt Consolidation 33%
- Major Purchase 5%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 4%
- Home & Auto Financing 11%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 28%
32. New York
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 5%
- Home Improvement 6%
- Vacation & Wedding Expenses 4%
- Business Expenses 7%
- Home & Auto Financing 9%
- Medical Expenses 4%
- Moving & Relocation 4%
- Other 24%
33. North Carolina
- Card Refinancing & Debt Consolidation 33%
- Major Purchase 6%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 6%
- Home & Auto Financing 11%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 25%
34. North Dakota
- Card Refinancing & Debt Consolidation 42%
- Major Purchase 6%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 4%
- Home & Auto Financing 6%
- Medical Expenses 6%
- Moving & Relocation 3%
- Other 24%
35. Ohio
- Card Refinancing & Debt Consolidation 35%
- Major Purchase 6%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 6%
- Home & Auto Financing 11%
- Medical Expenses 4%
- Moving & Relocation 4%
- Other 25%
36. Oklahoma
- Card Refinancing & Debt Consolidation 32%
- Major Purchase 6%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 4%
- Home & Auto Financing 12%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 27%
37. Oregon
- Card Refinancing & Debt Consolidation 42%
- Major Purchase 5%
- Home Improvement 4%
- Vacation & Wedding Expenses 2%
- Business Expenses 4%
- Home & Auto Financing 9%
- Medical Expenses 5%
- Moving & Relocation 5%
- Other 24%
38. Pennsylvania
- Card Refinancing & Debt Consolidation 36%
- Major Purchase 6%
- Home Improvement 8%
- Vacation & Wedding Expenses 3%
- Business Expenses 5%
- Home & Auto Financing 12%
- Medical Expenses 4%
- Moving & Relocation 4%
- Other 24%
39. Rhode Island
- Card Refinancing & Debt Consolidation 46%
- Major Purchase 5%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 3%
- Home & Auto Financing 9%
- Medical Expenses 3%
- Moving & Relocation 5%
- Other 22%
40. South Carolina
- Card Refinancing & Debt Consolidation 36%
- Major Purchase 6%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 6%
- Home & Auto Financing 10%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 24%
41. South Dakota
- Card Refinancing & Debt Consolidation 34%
- Major Purchase 6%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 3%
- Home & Auto Financing 10%
- Medical Expenses 6%
- Moving & Relocation 5%
- Other 28%
42. Tennessee
- Card Refinancing & Debt Consolidation 35%
- Major Purchase 5%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 6%
- Home & Auto Financing 11%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 26%
43. Texas
- Card Refinancing & Debt Consolidation 36%
- Major Purchase 6%
- Home Improvement 7%
- Vacation & Wedding Expenses 3%
- Business Expenses 6%
- Home & Auto Financing 10%
- Medical Expenses 6%
- Moving & Relocation 4%
- Other 25%
44. Utah
- Card Refinancing & Debt Consolidation 40%
- Major Purchase 5%
- Home Improvement 4%
- Vacation & Wedding Expenses 3%
- Business Expenses 4%
- Home & Auto Financing 10%
- Medical Expenses 7%
- Moving & Relocation 3%
- Other 25%
45. Vermont
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 8%
- Home Improvement 7%
- Vacation & Wedding Expenses 2%
- Business Expenses 3%
- Home & Auto Financing 10%
- Medical Expenses 2%
- Moving & Relocation 4%
- Other 25%
46. Virginia
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 5%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 5%
- Home & Auto Financing 9%
- Medical Expenses 5%
- Moving & Relocation 4%
- Other 25%
47. Washington
- Card Refinancing & Debt Consolidation 40%
- Major Purchase 6%
- Home Improvement 4%
- Vacation & Wedding Expenses 3%
- Business Expenses 5%
- Home & Auto Financing 10%
- Medical Expenses 5%
- Moving & Relocation 5%
- Other 25%
48. Washington, D.C.
- Card Refinancing & Debt Consolidation 34%
- Major Purchase 5%
- Home Improvement 5%
- Vacation & Wedding Expenses 4%
- Business Expenses 7%
- Home & Auto Financing 9%
- Medical Expenses 4%
- Moving & Relocation 6%
- Other 26%
49. West Virginia
- Card Refinancing & Debt Consolidation 31%
- Major Purchase 6%
- Home Improvement 9%
- Vacation & Wedding Expenses 4%
- Business Expenses 3%
- Home & Auto Financing 13%
- Medical Expenses 3%
- Moving & Relocation 4%
- Other 28%
50. Wisconsin
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 6%
- Home Improvement 5%
- Vacation & Wedding Expenses 2%
- Business Expenses 5%
- Home & Auto Financing 11%
- Medical Expenses 5%
- Moving & Relocation 3%
- Other 25%
51. Wyoming
- Card Refinancing & Debt Consolidation 38%
- Major Purchase 6%
- Home Improvement 6%
- Vacation & Wedding Expenses 3%
- Business Expenses 3%
- Home & Auto Financing 10%
- Medical Expenses 4%
- Moving & Relocation 5%
- Other 26%
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