When life throws you a financial curveball — in the form of a happy event, such as a wedding, or a challenge like a health crisis — taking out a personal loan can help you stay steady on your feet. Using a personal loan for life events such as moving into a new home or making a big career transition can be a smarter move than, say, maxing out your credit cards. But what major expenses warrant taking out a personal loan? Let’s have a closer look at how these loans work and when a loan makes sense.
Table of Contents
Key Points
• A personal loan can help cover major, out-of-the-ordinary expenses like weddings, medical bills, moving costs, or periods between jobs.
• Personal loans often have lower interest rates than credit cards and offer a fixed monthly payment amount that can extend over several years.
• Using a personal loan can help preserve your emergency savings fund for true emergencies.
• It’s important to have a plan for how you will repay a personal loan before signing on with a lender.
• When considering a personal loan, be mindful of potential fees, the risk of overborrowing, and the impact the monthly payment will have on your overall budget.
What Is a Personal Loan for Life Events?
A personal loan typically allows borrowers to obtain anywhere from $5,000 to $100,000, depending on credit scores and other aspects of their financial profile. A personal loan is usually an unsecured loan, so you aren’t putting your house at risk of foreclosure or car at risk of repossession if you aren’t able to repay what you borrow. Personal loans can be used for any purpose, but some borrowers take out a personal loan explicitly for a big life event.
Common Life Events that People Use Personal Loans For
While using a personal loan for expenses you might encounter in the ordinary course of life, such as rent or food, isn’t usually advised, obtaining a personal loan for a special expense is fairly typical. Consider these personal loan use cases:
Moving Expenses
Moving out of state can easily cost thousands of dollars, and you may not have extra cash laying around — particularly if you’ve recently forked over a hefty down payment to purchase a home — to cover a moving service or new bedroom furniture. The average move of more than 100 miles costs almost $5,000. A moving and relocation loan can help you pay for this out-of-the-ordinary expense.
Weddings
With more couples these days covering their own wedding costs, a wedding loan (a personal loan specifically for reception and honeymoon expenses) can come in handy. A personal loan for major purchases, such as a wedding dress or wedding rings, is a smart money move provided you have a plan in place to make the loan payments.
Many newly married couples receive cash gifts that can be used to cover wedding loan payments long after the celebration. They take out a wedding loan to cover the upfront costs, allowing them to enjoy their reception and honeymoon without stressing over the bills.
Medical Costs
About 3 million U.S. adults owe more than $10,000 in medical expenses, and medical debt is a top contributor to bankruptcy, even among people who have health insurance. Unpaid medical bills that are greater than a year old can damage your credit score, making it more challenging to obtain a good rate on a home loan (or to get a home loan at all). Using a personal loan for medical or dental expenses can allow you to pay off your medical provider, then break the cost up into personal loan payments made over a period of years, keeping your credit record clean.
Career Changes
Whether a career transition comes by choice or due to job loss, having a personal loan to cover bills while you move to new employment can help prevent you from running up your credit cards, which likely have much higher interest rates than you would see with a personal loan.
Recommended: Secured vs. Unsecured Personal Loans
How Personal Loans Compare to Other Financing Options
The common uses for personal loans, including paying for a wedding, major medical event, or cross-country move, are all events that you might also finance in another way, such as by tapping your savings or charging expenses to your credit card. Let’s look at how these methods compare.
Savings vs Borrowing
Dipping into your savings account to cover your costs might work if you are sitting on a generous cushion of cash. But if you haven’t saved even a few months of living expenses or if your savings are earmarked for something important, such as a down payment on a house, you might want to finance your wedding or dental work with a personal loan instead.
“An emergency fund is intended to be used at a moment’s notice. You’ll hear that a healthy emergency fund should cover between three and six months’ worth of living expenses — rent or mortgage, bills, food, and other essentials. Since you never know when an emergency might happen, it’s best to keep your fund relatively liquid,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. Obtaining a personal loan can help preserve your emergency fund for an emergency.
Credit Cards vs Personal Loans
If you need less than $1,000 for a major life event, then reaching for a credit card may make sense. But if you want to borrow more — and especially if you need lots more cash — then a personal loan could be a wise move. Credit card interest rates are typically higher than those for personal loans. And a personal loan allows you to spread out your costs over a period of several years, with routine monthly payments, as you’ll see below.
Benefits of Using a Personal Loan for Life Events
The way personal loans work means they are well suited to life events with large and relatively predictable costs, such as a wedding. Let’s examine their advantages:
Predictable Payments
Personal loans typically have a set interest rate and repayment term (often seven years), which means that monthly payments are predictable too. This allows you to slot them into your budget and set up an autopay from your bank account to ensure you make the payments on time.
Potentially Lower Rates Than Credit Cards
The average interest rate on a credit card is 20.97%, according to the most recent report from the Federal Reserve Bank of St. Louis. The average rate on a personal loan in March 2026 is 12.15%. And those with strong credit scores can expect to enjoy even lower personal loan rates. If you can obtain a personal loan at a rate lower than you have with a credit card, it may be a good idea to go the loan route versus using your credit card when securing funds for a major life event.
Structured Payoff Timeline
As we’ve noted, with a competitive, fixed-rate loan, borrowers not only know their interest rate up front, but also know their monthly payment amount and repayment term. This allows them to plan for other life events, such as purchasing a first home or retiring.
Recommended: Guide to Personal Loans for Beginners
Risks to Consider
Many financial decisions come with some element of risk, and taking out a personal loan is no different. Here are some of the things you’ll want to consider before seeking out a lender and signing on to a personal loan.
Fees and Interest
You will spend money, in the form of interest, to borrow money with a personal loan. So your goal should be to look for the lowest available interest rate, combined with low (or no) fees. Personal loans can have origination fees, late fees (for those who delay paying their minimum monthly payment) and early-termination fees (for those who pay off what they owe early). Some lenders don’t charge these fees, so it’s a good idea to explore different lenders when choosing a personal loan.
Overborrowing
Carrying personal loan debt in addition to credit-card debt and perhaps a student loan and/or a car payment can quickly put you into a position where you’ve overborrowed. In this situation, your debt-to-income (DTI) ratio (your monthly debts divided by your monthly gross income) has become too high. Ideally, you should maintain a DTI ratio of 36% or less. If you hope to apply for a home mortgage loan in the near future, this is especially important. Many lenders won’t entertain a conventional loan application from someone with a DTI ratio above 45%.
Budget Impact
It’s important to consider the effect monthly loan payments will have on your budget. Although personal loans are a relatively affordable way to borrow when compared to credit cards, they do come with a monthly payment schedule that will last at least a few years. Consider that carefully before committing to borrow.
How to Decide if a Personal Loan Is Right for Your Situation
Using a personal loan for expenses that are well defined and finite can be a smart financial move. A big move, a wedding, a period of unemployment in an otherwise robust work history — all of these are opportunities to borrow funds at a relatively competitive interest rate. As you decide whether to borrow, make sure your monthly budget can accommodate the loan payment amount. Use a personal loan calculator to see projected payment amounts.
The Takeaway
Major life events often come with big-time bills, and using a personal loan for purchases associated with a wedding or other singular event can be a wise decision. A personal loan typically offers a more competitive interest rate than a credit card, and its fixed rate will allow you to divide significant costs into predictable monthly payments stretched out over several years. Look for personal loan lenders that offer competitive rates and low (or no) fees.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
FAQ
Can you use a personal loan for anything?
A personal loan can be used for any legal purpose. But remember that you will need to repay what you borrow, with interest. This is why it’s typically considered a bad idea to use personal loan funds to make investments or start a business. If you’re borrowing to put money into a risky endeavor, make sure you have a backup plan for how to repay what you owe.
Is it smart to take a personal loan for big expenses?
It can be a good decision to obtain a personal loan to cover a large expense instead of using a credit card. Personal loans often have lower interest rates than credit cards, and they allow you to make predictable monthly payments over an extended period of time. Of course, it’s important to ensure the money you borrow with a personal loan is for a purpose that is important to you, and to have a plan to make your loan payments.
What life events justify a personal loan?
People use a personal loan to cover a wedding, a big move, a period between jobs, or to pay for a major surgery or extensive dental work. What life events warrant taking out a personal loan is best determined by examining your values and your financial situation. For example, some borrowers might use a loan to pay for a wedding, while others might scale back their celebration to fit the expense in their existing budget.
How much can you borrow with a personal loan?
How much you can borrow with a personal loan depends on the lender and your financial qualifications. Some lenders allow personal loans of $100,000, even $250,000. In order to borrow that much, however, you would need to qualify for the loan and then be able to make the monthly payments necessary to repay it at the interest rate you obtain.
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