A bit of extra cash when you need it most
A personal loan isn't the only option when you're short of cash- consider credit cards or overdraft facilities. But if you like the organised and structured repayments, or are buying a large purchase, then a personal loan could be right for you.
Personal loans have a rather unenviable reputation. In actual fact, these days loans are only one of several options if you find yourself short of cash, and if it proves to be the right one, there are plenty of places you can get your loan. So if you just find yourself a bit short at the end of each month, a loan isn't what you need (get a 'pink' credit facility instead).
The point of a personal loan is structured borrowing- you'll be repaying a fixed (usually) amount over a fixed term, so the ideal situation in which a loan is appropriate is where you can clearly say to yourself that the life of the loan is the same or less than the life of the product. For example, a car can well be bought with a personal loan. If the loan is across 5 years, it's fair to assume the car will last you five years, and possibly give you some money back at the end. Less sensible, unless you really know what you're doing, is taking out a loan for a holiday. Remember- the holiday will be over in three months time; your repayments definitely won't, so don't expect a holiday next year!
In exchange for being organised about your borrowing, a personal loan will attract a far better interest rate than unauthorised borrowing. Equally though, you can often get just as good a deal on your credit card, and that allows you to pay off what you want when you want. If you like the discipline of repayments or it's a large amount you're after, then go for a personal loan.