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Avoiding Extra Debt: 4 Situations You Shouldn't Take Out a Personal Loan

Sometimes, life gets in the way of your plans to save. Even when you map out your expenses for the month and account for every cent, including enough savings, your refrigerator decides to break down, requiring an immediate replacement. While it can put a significant dent in your budget and force you to re-strategize your expenses, it’s an essential expense that will ultimately be worth it, even when you have to take a small loan to afford it.

However, many people make the mistake of taking out loans to take care of different, avoidable expenses. That quickly lands them into further debt, and they consequently struggle to repay it. It can be hard to discern whether an instance is essential enough to merit a personal loan, but with our guide, you’ll know from the get-go if it’s worth taking on some debt or if it can wait. Here are four instances you shouldn’t take out a personal loan:

Renovating Your Home

Home improvement is a widespread reason to take out a personal loan, especially when addressing issues like leaking roofs, termites, or problems that make it difficult or dangerous to live at home. However, it’s best not to take out a personal loan to install new windows, knock down walls, or refinish your basement when you currently cannot afford it.

Renovating your home is a decision you make only when you have enough funds to cover the costs since it’s a non-essential activity. You’ll need to have a plan and the means to repay a loan, which is best saved for more critical needs.

Covering Funeral Costs

Dealing with the death of a loved one is complicated as it is, and worrying about the costs often adds even more stress. However, it’s best not to take out a loan to finance a funeral, as they often come with high interest rates that you may struggle to pay. According to the National Funeral Directors Association, funerals cost over $7,000, a jaw-dropping amount of money for many people. If people cannot pay for funerals with existing funds or life insurance, they may consider personal loans instead.

While personal loans may be used to finance a funeral, they should be treated as the absolute last resort and only when necessary for your situation. At the very least, be sure to shop around for personal loans to get the most favorable quote possible.

Planning Weddings

Weddings are notoriously expensive, reaching record-breaking amounts every year as couples indulge in many more luxuries: wedding favors, day-after brunches, and even bridesmaid robes. Due to societal pressure, they eventually become essential expenses, which may cause some people to turn to personal loans to afford a wedding.

However, it’s best not to take on debt to pay for a wedding, as it can add unnecessary stress and pressure at the start of your new life together. It will also restrict your ability to build your wealth, invest in a home, and other vital parts of married life.

Going on Vacation

Some people take out personal loans to fund their travel expenses when they go on vacation. It’s important to note that these loans are often expensive and charge high interest rates, particularly for those with poor credit SCORES. As such, avoid taking personal loans for purposes such as going on a vacation, no matter how well-deserved. They’re best for emergencies, and you may end up with a larger bill than expected if you decide to take out a loan.


It can be tempting to take out a personal loan to ease the burden of certain expenses, particularly when they’re sudden. However, it’s crucial to be discerning when deciding on taking out a personal loan to avoid additional debt that you struggle to pay off. It’s best to save as much money as possible in these four situations, especially if they are avoidable.

Mid-Town Finance Company offers various small personal loans in Birmingham, AL, which we can work to fit your needs. We also ensure to put clients on an affordable payment plan, helping them avoid insurmountable debt in our goal to make life a bit easier. Contact us today to learn more about how we can help you!

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