What can personal loans be used for?
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Robert Walton is a Senior Marketing Manager with many years of experience helping brands reach the right customers through clear, informative and straight-to-the-point comms. He's all about delivering top quality customer service and shouting about the great things we do here at Novuna. In his spare time, Robert dabbles with DIY and likes to write about his home improvement tips and tricks.
Friday 20th October 2023
A personal loan can help you to spread the cost of a big purchase. Simply borrow the money you need and pay it back over a series of fixed-rate monthly instalments.
One of the main advantages of using a personal loan is the flexibility it gives you. Unlike other forms of credit, such as a mortgage or car finance, you don’t need to tell the lender what you’re planning to use the money for.
This means you aren’t restricted when it comes to making a purchase. You can borrow as much as you need – in our case, from £1,000 to £35,000 – and spend it on whatever you choose.
Of course, there are some things you shouldn’t use a personal loan for, but if you stick to sensible purchases and only borrow the money you need, you could find a loan is a suitable option.
Top ways to use a personal loan
You can use a personal loan to fund almost any significant purchase. Just make sure you’ve checked our eligibility requirements, know the amount you want to borrow and how long you want to take out a loan for before you hit that ‘apply now’ button.
Here are some of the most popular reasons to take out a personal loan...
Make major purchases
Saving up for big purchases can take a long while, and we don’t always have the time (or sometimes the patience) to wait for our funds to build. A personal loan helps you to get your hands on the money you need now.
Drive away in your dream car
One of the most common purchases made with a personal loan is a car. With the average UK driver spending £438k on cars over their lifetime, it’s no wonder people sometimes need to boost their budget to help them get their dream wheels.
There are lots of benefits of using a personal loan to buy a car:
- You may find the APR is lower compared to other borrowing options, with potentially longer repayment terms too
- You’ll enter negotiations effectively as a cash buyer which could help you get a better deal
- You’ll own the car outright from the get-go – no worrying about mileage or usage restrictions, or any final fees
- You have greater flexibility when selecting your car. Buy from a private seller or dealership, choose new or used, electric or conventional… the choice is yours
- You can borrow a bit more to cover additional costs such as insurance or car tax
Our guide further explains the difference between car finance and personal loans.
Splash out for a special occasion
You can use a personal loan to help you buy a proposal-perfect engagement ring, a luxury watch for a milestone anniversary or a special gift to celebrate a big occasion.
Luxury goods can cost thousands of pounds. If there’s a special occasion just around the corner, you might not have the time to save up the money you need. Similarly, many of our customers simply prefer to spread the cost over more manageable monthly payments instead of dipping into their nest egg.
Get on your bike
The latest stats suggest that around 47% of people own or have access to a bicycle, so buying a bike is likely to be a purchase many of us make in our lifetime.
While, according to Aviva, the average cost of a bicycle is around £835, more expensive models can cost thousands. Electric bikes are also growing in popularity and, with an average cost between £1,477 and £2,921, many customers are choosing to take out a loan to make their new wheels more affordable.
Put money behind a big project
Funding a large project can soon eat into your savings. We often find that customers prefer to keep their nest egg intact for emergencies and unexpected expenses, turning to personal loans to help them access the funds they need for optional projects instead.
Even if you’ve budgeted down to the penny, you could find yourself needing to top-up your funds unexpectedly too. In fact, according to the Houzz & Home Report, 31% of homeowners went over budget on their home improvement projects.
A personal loan could be a suitable solution in these situations, allowing you to access the money you need quickly. When you apply for a loan with us, the funds could be with you in just two working days. This makes it a good solution if you’re right in the middle of a long-term project or renovation and need to find the money to boost your budget.
Renovate your home
Home improvement loans can help to make a renovation or refurbishment more affordable, allowing you to crack on with your project without worrying about depleting your savings.
You could find that a loan allows you to extend your budget, so you can take your home improvements to the next level. One of our customers, Neil, was able to fast-track his home renovation goals by getting a loan. He transformed his living room, redecorating from top to bottom, as he had access to the funds he needed to complete the project in one go.
Convert a van
The average cost of converting a van into a campervan stands at between £1,000 to over £10,000 – depending on how large the campervan is and how much of the conversion can be completed yourself. One thing’s certain, though – converting a van is not a cheap endeavour.
A personal loan could be the most suitable financing option for a van conversion, as you’ll be able to modify the vehicle to your heart’s content – something you simply couldn’t do if you were to take out car finance.
Take a look at a real-life example of how Jason used a personal loan to transform his Volkswagen into a bespoke luxury campervan.
Move house
Moving house can be an expensive endeavour, with experts estimating that a move costs over £14,000. From house surveys to stamp duty, there always seems to be another expense just around the corner – and that’s before you even start hiring removal companies and kitting out your new place.
A personal loan could help you to keep your savings intact – particularly if you need to stump up a large sum of cash for a house deposit. Some prefer to pay a smaller amount each month for a couple of years or so rather than spending every penny of their savings on a big move.
Pay for a special event
Once-in-a-lifetime events are, by their very nature, extremely special and only happen rarely. Why scrimp on one of your most memorable experiences, when you could borrow the money you need and simply pay it back in small, manageable chunks?
Plan a fairytale wedding
From booking a dream wedding venue to saying yes to the dress, almost every aspect of a wedding will have you dipping into your savings.
According to Hitched, the average cost of a wedding in the UK was £18,400 in 2022. That’s a huge amount of money to find and yet could cost as little as £3,65.77 each month when spread over five years.
A wedding loan allows you to borrow the money you need, when you need it. After all, who wants to compromise when it comes to the biggest day of their life?
Book an unforgettable holiday
There are lots of reasons you might choose to take out a holiday loan:
- Take your three-star holiday to a five-star experience with a personal loan, borrowing the money you need to extend your budget
- Book your getaway now, rather than waiting to save up
- Choose to spread the cost instead of depleting your nest egg
Take inspiration from Annette, who booked a once-in-a-lifetime trip to the USA using a holiday loan. She told us: “We wanted to avoid watching our money the whole trip. All the hotels we stayed in were top-quality, so we had the time of our lives rather than trying to scrimp and save. The loan allowed us to do that.”
Fund education expenses
A personal loan can be a suitable way to fund evening classes, training courses or postgraduate education.
While it’s not recommended to use a personal loan to fund day-to-day living costs, you could use a loan to fund tuition fees. A loan gives you access to the money you need to pay for a class or course upfront, so you can start your journey to an exciting new career path now rather than having to wait until you have the money saved up.
One of our customers, Richard, took out a loan to help get his finances back in order so he could enrol on a retraining course. He said: “I was stuck in a rut and wanted to make some changes. My work consumed most of my life. The best way to enjoy spending more time with my family was to retrain and start a new role that allows me to leave work at work.”
Cover unexpected expenses
Unexpected expenses and bills can put strain on your budget, particularly as they are almost impossible to plan for. While most of us will have some money in a savings account, it might not cover the costs of an emergency car repair or vet bill.
Applying for an online loan can be quick and simple. The money you need could be with you in just two working days – and usually much sooner. One of the main advantages of using a loan to fund unexpected expenses is the longer repayment terms.
Where you would need to pay the full balance of a credit card by the end of the month (or incur potentially very high interest rates), you may be able to spread the cost of a big bill over 2 to 7 years using a loan. Do be mindful, though, that while extending your repayment term will bring your monthly repayments down, you will pay more interest overall.
Consolidate debt
Those with several high-interest debts may wish to combine them all into one more manageable monthly repayment. Add up how much you owe in total across all your existing debts, take out a loan for that amount and then pay off your debt using that money. You will then only have one monthly payment to think about.
A debt consolidation loan may help to potentially reduce your monthly outgoings too, if the level of interest paid is lower than that of the debts consolidated. For Nicola, this was certainly the case. When she realised she was paying more off on credit cards than she would on a loan over five years, she decided to consolidate her debts. She’s now working towards becoming debt-free. Read Nicola’s story to find out about the benefits of using a loan to consolidate debt.
Is there anything I can’t use a personal loan for?
There are a few things many personal loan providers won’t lend money for. This includes loans for:
- Business purposes
- Investments
- Gambling
- House deposits
- Day-to-day living expenses
- Any illegal activity
Our guide on the things you shouldn’t use a loan for goes into more detail about why you can’t use a personal loan for these kind of things.
Remember - always know what you're using a loan for before applying
A personal loan is a type of instalment credit, which means you’ll borrow a pre-agreed sum of money and pay it back in instalments over a set period. There’s less flexibility when it comes to borrowing and repaying (as opposed to credit cards, for example, when you can borrow up to a maximum amount as and when you need to).
You’ll therefore need to think about how much money you need to achieve your goals, and make sure you apply for that amount only. If you apply for too much, you could end up paying interest on money you don’t need. If you don’t borrow enough, you might find you won’t be able to access the things you’ve got your eye on.
Ready to apply for a loan?
If you've decided what you'd use a loan for, you may wish to look into the loan application process. You will be eligible to apply for a Novuna Personal Finance loan if:
- You are aged 21 or over
- You are a permanent UK resident, and have been living in the UK for at least 3 years
- You are in permanent paid employment, self-employed or retired with a pension
- You have an income greater than £10,000
We also require applicants to have a good credit history. This means you have good experience of handling debt in the past, proving you’re likely to repay the money you borrow. If you’re not sure how to check your credit report or how to improve your credit score, our handy guides could help.
Once you've checked your eligibility, it’s time to read our guide on the questions to ask yourself before applying for a loan. You’ll need to figure out how much money you’d like to apply for, how long you want to be paying off your loan, and how much you’re prepared to pay in interest.
Our online loan calculator can give you an idea of how much it could cost you to borrow the money you need.
