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Need help erasing debt, handling an emergency, or making a large purchase? If so, a personal loan can be a smart way to do it.
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Personal loans offer a lump sum of money, which you pay off over a set number of years. The interest rate is fixed, and so is your monthly payment. And personal loans are “unsecured,” which means you don’t need to put up collateral to get one.
Here are a few ways to take advantage of a personal loan in 2025 — and how to decide if one’s right for you.
1. Consolidate high-interest debt
One of the most popular uses of personal loans is debt consolidation. If you’re juggling credit card balances with high interest rates, a personal loan can let you combine them into a single payment with a lower rate.
This strategy can help you:
- Pay less interest overall
- Stay on track with one monthly due date
- Pay off debt faster with a set timeline
It works best if your credit score qualifies you for a lower APR than what you’re currently paying. You can also avoid new credit card debt by closing or freezing your paid-off cards.
Want to start erasing debt today? Compare our top personal loans for debt consolidation to get started.
2. Cover emergency expenses
Need cash quickly? Personal loans can also help with unexpected bills like a medical emergency, urgent home repair, or temporary loss of income.
If you don’t have enough in savings, a personal loan can offer:
- Quick funding, often within one or two business days
- Fixed terms, so you know exactly what you’ll owe
- Less risk than a high-interest credit card
It’s not ideal to borrow for every surprise expense. But in a pinch, a personal loan may offer a more affordable way to bridge the gap.
3. Pay for a major purchase
Whether you’re planning a big home improvement or paying for a big event — like a wedding — a personal loan can spread out the cost of a large purchase over time.
A personal loan might be a good fit for:
- Renovations that raise your home’s value
- Buying furniture or equipment you need now
- Any large purchases where you want predictable monthly payments
Just be sure to shop around for the best rate and only borrow what you truly need.
When it comes to larger renovations, you may look into a home equity loan or home equity line of credit (HELOC) first. These options usually offer lower rates than a personal loan, and the interest may be tax-deductible.
A personal loan can be a decent fallback if you don’t have enough equity, can’t pay home equity loan or HELOC closing costs, or want to avoid using your home as collateral.
Looking to finance your next big purchase? See our list of the best personal loans available today.
4. Build your credit
This one’s a bit of a bonus: If you take out a personal loan for any of the above reasons, it could also help you build your credit score — if you make all your payments on time.
Lenders report your payments to the credit bureaus, so using a loan responsibly may improve your standing in their eyes. It can also enhance your credit mix, which shows lenders you can handle different types of credit (and accounts for 10% of your FICO® Score).
Just be sure you’re always borrowing for the right reasons — and have a plan to repay it. If so, you’ll be making the most of your newfound financial flexibility.
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