3 Common Personal Loans I'd Never Take Out

Although you can borrow to cover these costs, doing so may not be the best idea.

You can take out a personal loan to pay for almost anything you want. However, there are certain types of personal loans that lenders market to customers.

The types of loans that lenders advertise focus on common expenses. They tend to be popular with consumers too. Many people take lenders up on their offers to loan them money to cover these common costs. However, there are three personal loans I would never take out. Here's what they are.

1. Wedding loan

Wedding loans are marketed to people looking for help paying for their nuptials. Since weddings can cost tens of thousands of dollars, it's understandable that couples may choose to borrow to pay for their big day. And with the pandemic causing many weddings to be postponed, couples may be even more eager to celebrate with loved ones after a difficult year -- even if it means borrowing to afford it.

The only problem is, wedding loans make an already expensive event even more costly. By adding interest to the tab, you're making your wedding cost hundreds or even thousands of dollars more. And most wedding loans take several years to pay back, leaving couples with a big financial obligation right as they start their joint lives together.

You may decide you're willing to take on the financial burden of a wedding loan -- even if it means you might have to delay other goals such as buying a house. And if paying for a big event is really important to you and you're willing to sacrifice for it, a personal loan can be an affordable way to fund a wedding.

My husband and I decided we didn't want to take on this kind of financial obligation, though, since we'd rather not commit ourselves to years of debt for a one-day event. Instead, we had a smaller wedding at our house, got creative with our food offerings, and saved up the money to pay for it out of pocket.

2. Vacation loan

Vacation loans are also very common. That's understandable because vacations can be expensive and many people can't afford to take them without a loan.

Unfortunately, borrowing to fund a vacation means making it more expensive due to the interest you'll rack up. You also force yourself to pay for a vacation for many months or even years after the trip is over. This can affect your ability to afford other things -- including future vacations you might want to take.

Because we don't want to add interest onto our trip costs and reduce the flexibility in our budget by committing to a monthly payment for a vacation loan, my husband and I will not borrow to travel. Instead, we either sock away cash for vacations in a savings account or take affordable trips close to home that we can easily pay for.

3. Home improvement loan

It can often be necessary to borrow for home repairs because they can be such a big expense. Many personal loan lenders advertise funding for home fixes, but a home equity loan or line of credit may be a better approach. Although you are putting your home on the line and will have higher closing costs when you borrow against your equity, the interest rate will be lower than on a personal loan. Plus, interest costs are tax deductible.

Because of these benefits, I would use a home equity loan over a personal loan if I had to borrow for a home repair. However, instead of having to take out loans to fund home improvements, we have a special savings account for this purpose. We deposit 1% of our home's value into the account each year so we're ready to cover any maintenance tasks, repairs, or upgrades our property needs.

While you may decide that a home improvement loan -- or a vacation or wedding loan -- is worth it, it's important to weigh the pros and cons carefully and think about the big picture before you borrow. You may come to a different conclusion than I did and be willing to take one of these loans, or you may share my approach and opt out due to the downsides.