Personal loans might sound like something reserved for big, serious life events — but the truth is, people take them out for all sorts of reasons, both big and small.
Whether it’s covering an unexpected medical bill, consolidating high-interest credit card debt or finally giving the kitchen that long-overdue makeover, personal loans can offer a flexible financial boost when you need it most.
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Curious why so many people turn to them? Here’s some of the top reasons — and you might just find one that hits close to home.
Debt Consolidation
Dennis Shirshikov, professor of finance at City University of New York and head of growth and engineering at GrowthLimit, debt consolidation is still the primary impetus, where borrowers combine multiple high-interest debts into one lower-rate obligation to streamline their finances and potentially save thousands in interest.
Robert Macoviak, president of Oyer, Macoviak and Associates, agreed that debt consolidation tops the list.
“I regularly see clients drowning in credit card debt at [24% to ]29% interest rates who take personal loans at [8% to] 15% to consolidate everything into one manageable payment,” according to Macoviak.
He said one client last year consolidated $47,000 in credit cards into a single loan, cutting their monthly payments by $340 while saving over $18,000 in interest over five years.
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Major Home Improvements
Rather than tapping home equity, Macoviak noted that many of his clients use personal loans for urgent repairs like roof replacements or HVAC systems. This approach can be especially appealing for homeowners who either don’t have enough equity built up or simply prefer not to risk it.
Personal loans offer a faster approval process and fewer hurdles than home equity loans, making them a smart option when time is of the essence — like when your AC gives out mid-summer or a leaky roof threatens further damage. Plus, with fixed interest rates and set repayment terms, they provide a level of predictability that can be easier to budget around.
“This protects their home equity while addressing immediate needs that could affect their homeowner’s insurance coverage or claims,” Macoviak said.
Emergency Expenses
Medical bills, car repairs or temporary income loss force people into borrowing. In fact, CBS News reported that most Americans can’t afford a $1,000 emergency expense.
In these high-stress situations, a personal loan can offer quick access to funds when there’s little time to plan. Unlike credit cards, which often come with higher interest rates, personal loans can be a more affordable way to manage an unexpected expense without racking up revolving debt.
They’re also typically unsecured, meaning you don’t need to put up collateral — an added relief when you’re already dealing with a crisis. Taking the time to choose a loan with clear terms can help you handle the emergency now while keeping your finances on track later.
Before taking any personal loan, Macoviak recommended calculating the total cost including fees, ensuring monthly payments fit comfortably in your budget and considering how it affects your debt-to-income ratio for future major purchases like homes or cars.
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This article originally appeared on GOBankingRates.com: 3 Top Reasons People Take Out a Personal Loan
