A personal loan from your local bank or credit union can be a good thing. It can help you make improvements to your home, or it can help you pay for college. You might take out a personal loan in order to consolidate some higher-interest credit card bills or other forms of credit.

However, there are also some bad reasons to take out a personal loan. Here are the top 10:

1. Buying a pony. Because, hey – who doesn’t want a pony? Still, a pony takes a lot more money than just buying it. Unless you can buy oats on a regular basis, this is a bad reason to take a personal loan.
2. Buying a car. Unless you’re talking about a 10 year-old clunker, you should try to get a traditional car loan first. Your interest rate will be lower. I promise.
3. Going on a fishing trip. Most fishing trips shouldn’t cost thousands of dollars. If yours will, chances are you’re doin’ it wrong.
4. Paying bills. If you need to take out a personal loan to pay bills, you’ve got bigger problems. It’s a sign your budget may not be as well thought out as you might like. Try to find other ways to pay your bills, rather than with a personal loan.
5. Building a moat. If you must have a moat, get a home equity loan rather than a personal loan.
6. Paying a student loan. Personal loans are great to pay for college expenses, but not after the fact. Your student loan rates are going to be much lower than any personal loan.
7. Pocket money. Here again, if your budget can’t support your video game habit, you need to buck up and deal. That, or find a better job.
8. Starting a business. There are tons of better sources for startup money than a personal loan. I’m not saying you should never do this one, just that it should be a measure of last resort.
9. Buying an engagement ring. That’s just the first step in the “three rings of marriage.” The engagement ring, the wedding ring, and the suffer-ring.

10. To pay off a personal loan. That’s like robbing Peter to pay… well, to pay Peter, I suppose. After you pay the loan fees, even if you get a better rate, chances are it’s going to be a wash at best.

Photo via dreamcicle19772006