Here’s Why Taking Out a Personal Loan in 2025 Can Make You Wealthier by 2026

A personal loan might not seem like the first step toward building wealth. However,  when used strategically, it can help you get ahead financially, sometimes within just a year.

“A personal loan is like fire,” said Stoy Hall, CEO and founder of Black Mammoth, a financial services company. “Used right, it can warm your house or cook your food. Used wrong, it burns your whole financial future down.”

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From consolidating high-interest debt to funding career growth, launching a rental space or upgrading a small business, the right loan can unlock real opportunities.

Here’s why taking out a personal loan in 2025 can make you wealthier by 2026.

Invest in Career Growth and Upskilling

Using a personal loan to fund career advancement, such as certifications, specialized training or degree programs, can significantly increase a person’s earning potential.

“For example, if you’re in a technical field and want to level up, investing in a high-demand certification like AWS (Amazon Web Services) or PMP (Project Management Professional) can increase your earning potential by $10,000 to $20,000 annually,” said Doug Crawford, president and founder of Best Trade Schools.

When done strategically, Crawford said this type of investment often leads to promotions, higher-paying roles or successful career pivots that more than offset the cost of the loan.

“If you’re in a job with a stagnant salary but are willing to put in the effort to learn new skills or improve your knowledge, a loan can help cover the cost of that training,” Crawford said. “By consistently upskilling, you could see those salary increases within the first few years, making the loan a worthwhile investment.”

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Consolidate High-Interest Debt

Taking out a personal loan to combine multiple high-interest debts into a single lower-interest payment can lead to immediate monthly savings.

“Personal loan rates today can run from around 8% to 36% (or more), largely dependent on credit scores,” said Kyle Enright, president of lending at Achieve.

“Average credit card rates today are over 20%. So, if someone can qualify for a personal loan at a rate significantly lower than the rate on their credit card, they can use the funds from the loan to pay off the credit card debt.”

Before taking out a personal loan, it’s important to do the math. Experts said the most effective uses of personal loans are those that create more value than they cost in interest, especially when consolidating high-interest debt.

“If you’re consolidating debt, this is just the calculation of whether the interest on the consolidated loan will be more or less than the total interest on all the debts you’re paying now,” said Ari Weisbard, a tax and estate planning attorney.

“You can find the average interest rates on your current debts by totaling up all the interest you’re paying (multiplying each interest rate by its loan balance remaining) and dividing by the total of all your loan balances.”

Those savings can be redirected toward building wealth, such as investing, saving or paying off the loan faster, potentially improving net worth within a year.

Turn Your Home Into an Income Stream

A personal loan can fund upgrades that turn a home, or part of it, into a profitable rental.

Whether furnishing a space for short-term guests or renovating a basement for long-term tenants, these investments can quickly generate extra income and offset housing costs, helping to build wealth within a year.

“A personal loan can be used to invest in real estate,” said Aaron Razon, a personal finance expert at Couponsnake. “However, this strategic move should be backed by a well-thought-out financial plan and a solid understanding of the risks and rewards.”

Experts said homeowners should prepare for potential pitfalls, such as rising renovation costs due to inflation or slower-than-expected rental demand.

“It all comes down to how the numbers shake out, the certainty of growth and your tolerance for risk,” said Nick Birkby, user experience research lead at Flex, a fintech company. “If you’re borrowing at 10% and expecting a 5% return, you’re digging a deeper hole.”

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This article originally appeared on GOBankingRates.com: Here’s Why Taking Out a Personal Loan in 2025 Can Make You Wealthier by 2026