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Can I Use a Personal Loan for Anything?

With more than more than half of Americans reporting less than $1,000 in savings, you aren’t alone if you’re short on cash and considering a personal loan to pay for a range of expenses. For example, you might need a cash infusion to pay off old debts, cover emergency medical expenses, pay for a new roof or other home repairs, paying for your dream wedding or vacation, or even a new 4K TV. Because personal loan rates are typically lower than credit card rates, it can be tempting to apply for a personal loan to meet those needs; however, before you start looking up how to get a personal loan, consider whether your purpose justifies borrowing money.

Types of Personal Loans

Most personal loans are unsecured, meaning that the lender doesn’t require you to use specific assets as collateral. But sometimes you can get a lower interest rate on a personal loan with collateral. If you’re considering using collateral, where to get a personal loan depends on what type of collateral you want to use. For example, banks might use a savings account or certificate of deposit as collateral, whereas others might use a car or house.

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See: More Than Half of Americans Have Less Than $1,000 in Savings in 2017

Good Uses for Personal Loans

You can use the funds from your personal loan for any purpose. Unlike a mortgage, car loan, or student loan, you’re not restricted to spending the money on one specific purchase or expense. But that doesn’t mean all personal loan purposes are created equal.

Here are examples of good uses for personal loans:

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Related: 39 Ways to Save for Your Emergency Fund

Bad Uses for Personal Loans

Personal loans can help you get out of or avoid financial trouble. But if you use personal loans for the wrong reason, borrowing money might just make your financial hardship even worse.

Avoid using a personal loan for reasons including the following:

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Related: The Best Ways to Pay Off Every Kind of Debt

Personal Loan Considerations

Should you decide to take out a personal loan, shop around to get the best deal. Consider whether the personal loan is secured or unsecured, as well as the following factors:

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Up Next: How to Get the Best Personal Loan Rates

Michael Keenan contributed to the reporting for this article.