This is more just a curiosity than an actual real-world problem, but I noticed that most personal loans come with caveats like not being used for business purposes, buying property, stocks and shares, gambling, etc.

Say I want to buy a house with a £10k deposit:

If I have no money then I need to use the loan for the deposit, so fair enough I will be rejected from the loan

However, if I already have £10k, could I use that for the deposit and use the loan to replace my own personal expenditure?

In my head, this is no different to just taking out the £10k loan and using it directly as the deposit, but is this how the lender would see it? Equally, due to the fungible nature of money, if the loan was paid into the same account as my existing pot of money, would I be able to prove that I hadn't used the loan for restricted purposes?

1 Answer 1


Banks are aware of this fungibility and will take any loan into consideration when determining eligibility and risk. Taking out a loan for any reason during the process will likely be a red flag because of this very scenario, and may impact your loan eligibility.

They will look at your current debt/income ratio to ensure that you can afford the loan, and your current liquid assets to make sure the down payment isn't going to cause an immediate burden.

The caveats you mention for "personal loans" are there because they are very risky and may impact your ability to pay back the loan. No bank is going to lend to money to gamble or invest with, and if you use it to buy property, they will instead want to make the property collateral for the loan to reduce their risk.

  • 1
    Thanks for this - I think that clears up the questions around buying a property as I'd not considered bank checks etc, but what if I followed the same process for gambling - I have £10k in the bank, deposit that with e.g. Bet365, take out a £10k personal loan to cover day-to-day spends? It's still the same amount entering and leaving the same bank account
    – Luke
    Feb 8 at 15:23
  • 1
    What part of "very risky" does not apply to gambling?
    – keshlam
    Feb 8 at 21:40
  • 1
    If you agreed not to use the proceeds to gamble then effectively used the proceeds to gamble by moving the money from one pocket to another, you would likely be in default, though I do not know UK law well enough to be certain.
    – D Stanley
    Feb 8 at 21:50
  • 2
    Money is fungible. It doesn't matter whether you use the loan to buy groceries and gamble with your cash, or buy the groceries with cash and use the loan to gamble. It's the same financially; the only difference is which hand you pick it up with. Repeat that until you understand it; otherwise you will get yourself in serious trouble. Not may, will.
    – keshlam
    Feb 9 at 1:24
  • 4
    @keshlam: Does that imply that, if you have any loan balance outstanding at all, you must never gamble even a penny, because that could be seen as using the loan to gamble? (I don't think it does, but that would be the logical conclusion of what you're asserting... I think there are probably other considerations that come into play...)
    – psmears
    Feb 9 at 14:11

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .