Can I use a personal loan to finance an expensive purchase?

Personal loans are often used for big ticket expenses such as a new car and can be one of the cheapest ways to borrow money.

Rebecca Goodman Last updated on 03 July 2021.
Can I use a personal loan to finance an expensive purchase?

There are many different reasons why you might take out a personal loan, from paying for a new car, a wedding, or a holiday, to refinancing existing debt or paying for costly dental treatment.

Whatever the reason for taking out the loan, you need to make sure you can afford the repayments and that you’ve considered all the options available to you. For example, if you’re about to buy a new boat, is it better to take out a personal loan or agree to a boat financing plan? Make sure you are aware of things such as fees and interest for any debt you take on.

Here we look at some of the main reasons for taking out a personal loan and explain what you need to be aware of and the best alternatives.

How can a personal loan be used for an expensive purchase?

When you take out a personal loan, you agree to the amount you want to borrow, the timeframe for paying it back, and the interest rate.

Most high street banks offer personal loans, along with many online lenders, and you can usually borrow between £1,000 and £25,000.

» COMPARE: Personal loans available online

As the loan is unsecured, the amount and the rate you’re given depends on your credit history. In some cases, you may not be accepted if your credit score isn’t good enough - but it is important to remember that your application will leave a mark on your credit score, so it’s always worth using a free eligibility checker first. It won’t harm your credit score and will give you an idea about the types of loans you might be able to get.

» MORE: How credit checks leave a footprint on your credit report

When a loan is approved, the money is paid into your bank account - usually by the next working day - and you can then spend it however you like. The agreement to repay the loan is with the lender, and they don’t typically need to know how you spend the cash, though there may be some restrictions.

How personal loans for expensive items work

Most personal loans have a set rate of interest. This means you’ll know from the start exactly how much the loan will cost you, what the monthly repayment will be, and how long you’ll be repaying it for.

You’ll also be told how you can repay the loan early, if you decide to, and whether any early repayment charges apply.

» COMPARE: Personal loan rates and deals

What can you use a personal loan to buy?

Here we look at some of the most common items you might buy with a personal loan. With any expensive item, it’s always worth using your savings if you have them as this will always be cheaper than taking on more debt. But if you don’t have the cash, a personal loan might be an option to consider.

» MORE: How to choose a personal loan

A new car or boat

Using a personal loan to buy an expensive item like a car or boat will depend upon the total cost. If it’s a top-of-the range model you’re after, the upper limit available on a personal loan (typically up to £25,0000 depending on the lender), may not cover the total cost. Other options include a boat financing or car finance agreement, whereby you pay an initial deposit and then enter into an arrangement with a lender and pay it a monthly amount for a set period of time.

» MORE: How to buy a car with a personal loan

Plastic surgery

You can also use a personal loan to pay for private cosmetic or medical treatments. You receive the money from the lender, and you can use this to pay the hospital directly. Alternatively, there may be a financing option available - but it’s worth comparing the rate of this with the rate on the personal loan as it may be more expensive.

Dental procedures

Dental work can be expensive, particularly if you are paying for costly private treatment. If you don’t have the cash to spare, a personal loan is an option. You may also be able to use a dental insurance plan, with which you pay a monthly sum and are then covered for certain treatments, although you usually can’t claim for pre-existing conditions.


The cost of a wedding can easily run into thousands of pounds and one way to pay for it is with a personal loan. This may be cheaper and lower risk than taking out a secured loan - which is set against another asset you own like your house. However, if you have a good credit record and don’t need to borrow a huge sum, you could borrow it for free with a 0% interest credit card, so long as you pay the money back before interest charges kick in.

Home improvements

Depending on what improvements you’re making to your home, a personal loan could be a good option, especially if the interest rate charged is cheaper than you could get elsewhere. Other options include using a credit card, but this is only viable if the interest rate is cheaper, or if you can clear the card before the interest rate kicks in if it’s a 0% card. A secured homeowner loan could be another option as this may come with lower interest rates as the lending will be secured against your home. Learn about other options in our guide to UK home improvement loans.

Is a personal loan right for you?

The best way to pay for anything is with cash you already have. But this isn’t an option for everyone. A personal loan can be a useful way to borrow money as long as you can comfortably afford to repay it.

The most important points are that you can repay the loan, you understand how much it will cost you to borrow, and you are aware of any penalty charges that might be imposed.

However, suppose the reason for taking out the loan is for something you don’t need immediately, such as an expensive holiday or a big home renovation project. In that case, you could consider waiting a little longer and saving up the money to pay for it or cutting your budget to make it more affordable.

» MORE: Loan, overdraft or credit card — which is right for me?

Image source: Getty Images

About the author:

Rebecca Goodman is a freelance journalist who has spent the past 10 years working across personal finance publications. Regularly writing for The Guardian, The Sun, The Telegraph, and The Independent. Read more

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