3 Emergency Situations Where a Personal Loan Makes Sense
Written by
Cindy Lamothe
Edited by
Rebekah Evans
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Life has a funny way of throwing curveballs when we least expect them. One minute you’re cruising through your day and the next, your car breaks down, a surprise medical bill shows up or your beloved dog eats something he definitely shouldn’t have.
In moments like these, quick emergency cash isn’t just helpful — it’s essential. That’s where a personal loan can come in handy. While it’s not always the first option people consider, there are certain emergency situations where personal loans actually make perfect sense — here’s a breakdown.
Consolidating Toxic High-Interest Debt
One of the most innovative uses of a personal loan is to eliminate high-interest credit card balances that are quietly consuming people’s finances.
Shanli Liu, finance expert and managing partner of FreedomFolio, has seen folks juggling five cards at 27% APR, barely making a dent.
“A fixed-rate personal loan with a much lower interest rate gives you breathing room,” Liu said.
It’s structured, has an end date and forces repayment discipline. She said credit cards are designed to keep you spinning in circles. A personal loan, used right, draws a line in the sand.
Funding a Mandatory Relocation for Work
“I once worked with a client who landed a great job out of state but did not qualify for relocation support,” Liu explained. “He needed the first and last month’s rent, deposits and new furnishings.”
Needless to say, the client did not have savings ready. A personal loan bridged that moment. That new role tripled his income within two years, said Liu–the loan bought him upward mobility. In situations where future income is reliable but upfront cash is the hurdle, a personal loan can be the right tool, not a trap.
Covering Extensive Out-of-Pocket Medical Procedures
Consumer Financial Protection Bureau (CFPB) research has shown that medical debt is crushing 100 million Americans. If it is a non-negotiable health expense and you have exhausted health savings account (HSA) funds or savings, a personal loan can prevent delayed care.
“Especially when avoiding high-APR medical credit cards,” Liu said.
Just ensure the monthly payment aligns with your actual budget. Not your ideal budget. Your real one, with groceries, gas and random vet bills included.
Kyle Enright, president of lending at Achieve, agreed, noting a personal loan is critical to take care of unplanned critical expenses, such as medical bills.
However, he said important that a potential borrower have the confidence in his/her ability to make all payments on time and health status may come into play here.
More From GOBankingRates
