None of us are born knowing everything there is to know about managing our personal finances. Yet we’re constantly faced with money management decisions. It can feel downright overwhelming at times. And, of course, it’s natural to have a lot of questions along the way.

One such question you may find yourself asking is, “When does it make sense to get a personal loan?” While getting a personal loan from a credit union, bank or online lender can prove advantageous at times; there are other situations in which it’s actually counterproductive to do so.

When It Makes Sense to Get a Personal Loan

To Consolidate Higher-Interest Debt

According to Bankrate, the average interest rate on a personal loan can range from 4.99 percent to 35.99 percent. The rate for which you qualify will depend on factors like your credit history among other things. But the average credit card interest rate after the zero-interest introductory period falls around 17.45 percent.

Put simply, a personal loan tends to be simpler and less expensive to pay back than, say, a handful of high-interest credit cards. This is precisely why some consumers decide to use a loan to consolidate their existing balances, then focus on making that single monthly payment at a reasonable interest rate for however long it takes to fulfill the terms of the loan.

To Fund Home Improvement Projects

As NerdWallet points out, some home improvement projects can add value to your home. So, using a personal loan to fund them could be a savvy move — the interest is generally lower than credit cards, and you won’t have to offer up your home as a secured asset like you would with a home equity loan.

To Finance a Large Purchase without Credit Cards

Certain milestones in life come with hefty price tags, like that dream international vacation or even your wedding. Putting all these expenses on credit cards can leave you with high interest charges and indefinitely lingering debts. Using a personal loan tends to keep interest rates lower and afford you a structured plan for repayment.

When It Doesn’t Make Sense to Take Out a Loan

When You’d Pay More in Interest on the Loan

You may find as you’re searching for a debt solution that consolidation actually wouldn’t save you money. Depending on your credit score, the loan term and other factors, you may actually find yourself paying more than if you soldiered on — paying down the balances of your existing debts — month by month.

In other words, debt consolidation tends to work best for those with already strong credit. If your credit score falls short of excellent — or even good — then you’ll likely need to find another solution until you’re in a position to get the most favorable loan terms. Debt settlement is one option for those struggling to eliminate serious debt, as many Freedom Debt Relief reviews can attest. You may also qualify for a debt management plan (DMP) through a credit counseling agency, which is a different form of consolidation.

When You’re Paying Off Medical Bills

Medical bills can throw a real wrench into the works when it comes to your financial health. Your first instinct may be to panic and throw them on credit or take out the first personal loan you can find to pay them off.

However, it’s worth taking a deep breath and talking to your healthcare provider first. Look over every charge on each bill — and don’t be afraid to query unclear charges. Ask questions along the way. There are often alternatives to paying a bill in full, but you have to speak to your provider to know. You may also qualify for medical forgiveness if you’re facing a hardship.

It makes sense to get a personal loan if it would make debt repayment simpler and less expensive. The terms for which you qualify will depend on the lender, your financial history and more — so explore your options before rushing into a loan.