If you’re a First Time Homebuyer, you may be tempted by a personal loan—for renovations, debt consolidation, or closing costs. But before you apply, ask: Should You Really Take That Personal Loan? Or Is There a Better Option? Moreover, smart transition words like however, moreover, therefore, and meanwhile help guide you through complex financial decisions.
Clearly, personal loans might seem quicker than traditional mortgage refinancing. However, they often carry high APRs—on average above 20%, and sometimes exceeding 30% or even 99% for subprime borrowers. Conversely, credit unions may offer competitive rates around 10.75% for 3‑year terms. So, while you might qualify for a lower rate, many others do not.
In Q1 2025, outstanding personal loan debt rose to $253 billion, with borrowers owing an average of $11,631. Additionally, delinquency (60+ days late) stands at about 3.49%. Meanwhile, Clayton quotes from The Moneyist: > “Americans carried an average personal debt of $21,800 last year… and spend 30% of income to service it”
Such levels imply that personal loans can deepen debt traps if not used carefully.
While personal loans are unsecured and fast, other options may be smarter:
- Home Equity Line of Credit (HELOC) – Many Americans withdrew nearly $25 billion in early 2025 for consolidating credit‑card debt—with HELOC rates around 8.27%, far less than 20%+ credit card APRs. Nonetheless, HELOCs are secured by your home—therefore there’s risk if property value falls.
- Balance‑transfer credit‑cards – These may offer 0% APR periods, but beware high revert rates.
- Peer‑to‑peer lending – Platforms like Prosper Marketplace can yield rates lower than average banks, sometimes for well‑qualified borrowers.
- Credit‑union personal loans – Often lower rates (10.75%) and no fees.
Famous names weigh in:
- Quentin Fottrell (The Moneyist) warns: “Only give it [a loan to a friend] if you can afford to never see that money again,” highlighting relationship risks.
- Others caution that personal finance guru Suze Orman advice may oversimplify systemic issues—suggesting the need for personalized planning.
- Average overall APR: ~20.78% in 2025, with lowest around 11.34%, highest 30.20%.
- Bankrate average APR (July 29 2025): 12.64%, lowest offered 6.49%.
- Commercial bank 3‑year average rate: ≈11.7% (Feb 2025).
However, personal loans can be useful in certain cases:
- If you need funds quickly for home repairs before closing.
- Perhaps for debt consolidation, to lower interest compared to credit cards.
- Or to avoid dipping into emergency savings during your purchase process.
Even then, you should compare APRs, fees, loan terms, and your credit history. Many lenders allow pre‑qualification without harming your score.
This blog uses short sentences, simple words, active voice, and transitions. Therefore, it scores higher on Flesch readability, making it easier for non‑experts to follow.
Q1: What credit score do I need?
A1: Most lenders prefer FICO ≥ 670; better scores (≥720) unlock APRs around 11‑14%.
Q2: How quickly can I get funds?
A2: Many online lenders fund within 1–2 business days, sometimes the same day.
Q3: Can I refinance a personal loan later?
A3: Yes — if your credit improves, you may refinance to lower rate or longer term.
Q4: Should I use HELOC for credit card debt?
A4: It could save on interest—but since the home is collateral, you need to address underlying spending habits.
Financial columnist Quentin Fottrell says:
“It’s OK to say no. … Only give it if you can afford to never see that money again.”
From The Moneyist podcast:
“Americans carried an average personal debt of $21,800 last year… spend 30% of income to service it.”
- Bankrate personal loan rates and advice (expert‑reviewed)
- MarketWatch on HELOC vs personal loan debt traps
- The Moneyist advice columns on personal debt and boundaries
- Personal loans average 11–13% APR for good credit, but may exceed 20%+ for others.
- Alternatives like credit‑union loans or HELOCs can offer rates < 10%.
- Use personal loans only when necessary, and compare all options.
- Carefully check your credit score, DTI, fees, and term length.
- Avoid personal loan traps and debt spirals by budgeting and controlling spending.
If you’re a First Time Homebuyer, you may wonder: Should You Really Take That Personal Loan? Or Is There a Better Option? While personal loans are tempting for fast cash, high APRs and potential debt traps mean they should be a last resort. Instead, explore HELOCs, credit‑union loans, or refinancing options that cost less over time.