I'm looking at getting a personal loan for a variety of reasons, some good, some not great. I don't know about the rest of the world but in New Zealand they seem to want to treat me like an idiot because I'm only 27 and they take a lot of time trying to figure out where every cent of the loan is going.

But as an adult, who understands interest rates and repayments and that saving is better than borrowing (all the complicated stuff like that) if I am willing to take on a debt within the limits of what a bank is willing to lend someone in my position... why do they care where I spend it?

For example, let's say I earn enough to comfortably make payments on a $10k loan at a banks highest interest rate of 20% over 5 years (about $250-$300 a month). My credit check shows regular payments in all the normal areas, and my employment history is only getting better (I work in Software Development).

At the end of the day, does it make a difference to the bank if I'm paying for a holiday, an emergency dog removal or $10k worth of Jellybeans for my new jellybean hot tub?

What's the reasoning behind wanting to see price quotes for things I'm looking to pay for, when they'll be getting their payments regardless?

  • 1
    Could be a regulatory requirement, help root out suspicious activity.
    – Hart CO
    Commented Aug 2, 2017 at 2:01
  • 2
    "They'll be getting their payments regardless." They don't know that; are you sure they aren't interested in collateral?
    – chepner
    Commented Aug 2, 2017 at 2:03
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    A guess - if you are spending the loan on something "responsible", this suggests you are a responsible person who is more likely to repay the loan, and thus they might be more willing to make the loan, or to offer you a better rate. Commented Aug 2, 2017 at 3:00
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    (a) You know whether you are or are not a a responsible person who "who understands interest rates and repayments" but they don't. Asking these questions can be one way to find out. (b) Regulations I don't know how deeply banks question loan applicants now, but many years ago in the UK the regulations over what you could spend a personal loan on were very strict (and usually involved speaking to the branch manager in person).
    – TripeHound
    Commented Aug 2, 2017 at 7:34

3 Answers 3


Yes, even for an unsecured loan the purpose of the loan is valuable to underwriters. Asking for price quotes seems excessive, I'd probably try a different bank. But "some not great" reasons for the loan might be a gigantic underwriting red flag causing you do undergo additional scrutiny...

  • At the end of the day though, are there really any great reasons to get a $10k debt? I'm not going to be flushing this money down the toilet (literally or figuratively). I wouldn't consider needing to buy a crappy second hand car a fantastic reason to get a loan but it's on my list.
    – Wompguinea
    Commented Aug 2, 2017 at 2:05
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    The issue with something like a car is lenders would much rather make a loan secured against the car; and to do that the car has to meet some criteria. An unsecured loan for something like a car is red flag, it indicates either you couldn't get an auto loan or the car isn't fit to be collateral.
    – quid
    Commented Aug 2, 2017 at 2:21
  • Your comment should probably be included in the answer: if I was a lender in New Zealand, I would probably prefer the car purchase was made with a secured loan.
    – Qsigma
    Commented Jul 23, 2020 at 17:08

Although personal loans are open and can be used for a number of things, not every lender allows your loan to be used just for anything.

For Example, you may not be able to use your loan funds for secondary education expenses or your business.


Purposes for a personal loan can include financing a large purchase, covering an emergency expense, and consolidating debt. So, evaluate the purpose of a loan to determine whether you need to borrow and whether you have the ability to make payments.

Here in India, we can just mention the reason on the loan application and then use it for whatever purpose we want.

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