Many or all companies we feature compensate us. Compensation and editorial research influence how products appear on a page. Personal Loans Personal Loans for Investments Updated Jun 16, 2023   |   6-min read Written by Lindsay VanSomeren Written by Lindsay VanSomeren Expertise: Mortgages, personal loans, student loans, auto loans, banking, budgeting, debt, insurance, credit cards, credit Lindsay VanSomeren is a personal finance writer living in Suquamish, Washington. She's passionate about helping people learn how to manage their money better so that they can live the life they want. In her spare time, she enjoys outdoor adventures, reading, and learning new languages and hobbies. Learn more about Lindsay VanSomeren Reviewed by Crystal Rau, CFP® Reviewed by Crystal Rau, CFP® Expertise: Equity compensation, oil & gas investments, education planning, investment planning, student loan planning, retirement Crystal Rau, CFP®, CRPC®, AAMS®, is a certified financial planner based out of Midland, Texas. She is the founder of Beyond Balanced Financial Planning, a fee-only registered investment advisor that helps young professionals and families balance living their ideal lives and being good stewards of their finances. Learn more about Crystal Rau, CFP® Investing your money is one of the best ways to grow wealth. But how do you grow your wealth if you don’t have anything to invest? Most people use their savings and income to invest. But if you find a hot, limited-time-only investment opportunity or just can’t muster the funds, you might wonder whether you can take out a personal loan for investing. We don’t recommend this in most cases due to the risk and the difficulty in making a profit after you pay interest on the loan. However, it might be an option in some instances. In this guide: When can you use a personal loan for investments?Pros and cons of using personal loans to investShould you use a personal loan to invest?What lenders allow personal loans for investing? When can you use a personal loan for investments? Personal loans have a wide range of uses, but they have limits. Most personal loan lenders prohibit using the funds for the following: Illegal activitiesGamblingPostsecondary educationInvesting and business purposes “Securities” is the common term lenders use to prohibit investments in their contracts. This refers to traditional investments, such as stocks, bonds, and index funds. The world of investments is broad, however, and you might be able to use your personal loan funds for other purposes. For example, if a lender prohibits using the loan funds to buy securities, you may still be able to use that money to buy gold or silver or invest in a career boot camp. If you’re unsure, it’s best to check with your lender. Most lenders don’t ask for receipts when you take out a personal loan. If you used the funds to invest in cryptocurrency or kick-start your IRA, for example, it’s unlikely your lender would find out. However, when you sign the loan agreement, you’re holding yourself to a legal agreement. If you break the terms of the contract, your lender can take action against you. (The action it can take is written into the contract.) Pros and cons of using personal loans to invest It’s crucial to weigh the pros and cons any time you take out a loan, especially when considering a personal loan for investing. Keep the following in mind. Pros Potential to earn returns that surpass what you’ll pay in interest to borrow the loan. Participate in an investment opportunity sooner. Cons Interest you pay on loans lowers your realized investment returns. You could owe more if your investments fail. Challenging to find lenders that will allow using loan funds for investments. Can harm your credit if you pay late or default on your loan. Personal loan rates may be higher than investment returns, especially if you have bad credit. Should you use a personal loan to invest? Most financial experts advise against using personal loans for investments, and for good reason: It’s just too risky. You’d need to earn a sufficient rate of return on your investment to overcome the interest rate you’re paying on the personal loan. If you don’t have excellent credit and qualify for the lowest rates, this math dance can become more wobbly. Market returns don’t have a built-in guarantee, so this strategy can put you at risk of losing more than you began with. Focus on building a firm foundation first. The market will always be there, and other opportunities will arise. What if you can make more on the investment than the interest you’ll pay on the loan? To overcome the interest-rate hurdle, you might be tempted to choose the highest-yielding investments available. But those tend to be the riskiest—boosting the odds that your investment could fail in a big way. That can lead to you being upside-down on your loan, owing more than the investment is worth. Another significant hurdle is lender availability. Since only select lenders allow you to use loan funds for investing, you can’t shop around for the best personal loan rates as much as for more common loan uses, such as debt consolidation. You’ll also need to consider your ability to repay the loan. If your income drops because you lose your job, or your expenses go up because you must pay for an emergency, taking out a loan for investments (or anything else, for that matter) puts you more at risk of defaulting on your loan. We don’t recommend using a personal loan for investing unless you meet these five criteria: You have a solid, stable income and an excellent credit score.You aren’t investing money you can’t afford to lose or pay back.You can find a lender that allows you to use loan funds for investing.You can get approved for personal loan rates well below what you expect to earn.You have a high risk tolerance and a healthy emergency fund. What lenders allow personal loans for investing? Most personal loan lenders prohibit using personal loan funds to buy investments, but our research found three lenders that allow it. If you meet the criteria we laid about above, these are among the best options for a personal loan for investing. Discover Bank View Rates Personal loan Offers a 30-day money-back guarantee if you change your mind.No fees aside from a late payment penalty.One of the highest-rated lenders for customer satisfaction in J.D. Power’s 2022 survey. Discover Bank offers terrific options for personal loans, especially for a company that’s better known for its credit cards. Discover can deliver fast funding—as soon as the next business day in some cases, which is important when time is of the essence for a promising investment. Key features: Credit score category: GoodSoft credit pull to check rates? Yes Deposit time: Next business dayOrigination fee: NoneLate fee: $39Interest rates (APR): 6.99% – 24.99%Discounts: None offeredRepayment terms: 3 – 7 years LendingPoint View Rates Personal loan Decent rates for borrowers with bad credit. Minimum $35,000 annual income is required for approval. If you’re charged an origination fee, deduct it from your loan proceeds, or roll it into your loan financing. LendingPoint is among the lowest-cost lenders for borrowers with poor credit. Even so, the rates in this case may still exceed the returns that all but the riskiest investments offer. It’s crucial not to invest more money than you can afford to lose. Key features: Credit score category: PoorSoft credit pull to check rates? Yes Deposit time: Next business dayOrigination fee: 0% to 8%Late fee: N/AInterest rates (APR): 9.99% – 35.99%Discounts: N/AAvailability: Unavailable in Nevada or West VirginiaRepayment terms: 2 – 6 years PenFed Credit Union View Rates Personal loan Apply with a co-borrower if you like.Best if you prefer a credit union to a bank or online lender. Check your rates without becoming a member. If you prefer a credit union, PenFed allows borrowers to use loan proceeds to invest. Anyone can join the credit union. You can check your rate and apply before joining if you’re not a member. You must become a formal member to accept the loan, however. Key features: Credit score category: FairSoft credit pull to check rates? Yes Deposit time: 1 – 7 business days, depending on how you want to be paidOrigination fee: NoneLate fee: $29Interest rates (APR): Starting at 6.49%Discounts: N/ARepayment terms: 1 – 5 years Note: Please review our list of criteria above and ensure you meet all five before you apply for a personal loan for investing.