Is it best to use savings or get a loan?


If you’re planning a purchase, is it better to save up or get a loan? Read up on the PROs and CONs of both options to make a careful, informed decision!

If you have a major purchase coming up, you might be wondering about what the best way to pay for it is. Saving up is always an option, but will that go well enough for you? Some people prefer taking out personal loans, but that can turn into a sticky situation as well, if you can’t afford to repay. With both options having advantages and disadvantages, how do you decide what is best for you and what financing solution to choose? Keep reading to find out all about the PROs and CONs of savings and loans and then take your time to decide.

Saving up


1.    You don’t go into debt

Obviously, the biggest difference between the two options is that one of them entails going into debt and one doesn’t. One of the benefits of saving money is that you do not need to get it from somewhere else. That means that you don’t owe anyone anything, you don’t need to repay for a long time, and you don’t pay any sort of interest. From many points of view, this can be the most affordable financing solution. Not to mention that this way, you don’t risk losing assets to lenders like you would if you were unable to pay your mortgage or something like that.

2.    It doesn’t matter if you have bad credit

Another advantage is that no one cares about your credit score, as long as you can pay. So, if you’re looking to purchase a motorbike, for example, and you want to go through the financing route, your financial situation would be grilled, checked and prodded. But if you show up with cash, no one will enquire about your credit rating because it is simply not relevant to the present transaction. It can be incredibly liberating to not be judged and assessed based on a number reflecting your past.


1.    You can only afford as much as you save

One of the major drawbacks with saving is that you can only ever afford to spend as much as you’ve saved. So, if you want to make a major purchase like a house, a car, or the motorbike we were talking earlier, you would need to save a significant amount of money, and most of the time, that is simply not possible. This can also become a problem with smaller expenses, so if you’re not a very good saver, you may not be able to buy much.

2.    It can take a long time

The other thing you should keep in mind, when it comes to saving, is that it can take a very long time. Depending on how you intend to spend the money, saving might not even be a realistic option if the situation at hand has a ticking clock attached. Time-sensitive purchases are excluded from the start, and even if your purchase is not immediately necessary, you may end up getting bored, frustrated, or impatient long before you reach your goal.

Getting loans


1.    You can get a higher amount of money

If you want to make a major purchase, then a loan will be your best bet, because it enables you to get more money than you would have otherwise been able to save. So, assuming you’re interested in buying a home, making a trip, or having a massive wedding, you can materialise those plans with the help of a loan. Then, you can repay it over several months or years, in affordable instalments.

2.    You get the money instantly

Another thing to consider is the fact that a loan enables you to get the money quickly. Depending on the type of loan you get, you can have the money in as little as a few hours, or it can take a few days for it to reach your account. This way, you don’t have to wait to spend your money; as soon as you get it, you can go out and purchase whatever you want, and then start paying it back almost immediately. You get the instant gratification and the ability to pay affordably.


1.    You pay interest

Now, interest is something you can’t get away from, most of the time. There are some credit cards that offer you 0% interest for the first year, for example, but other than that, whenever you borrow money, you are going to have to repay a large amount, due to interest. The rate can be higher or lower, depending on the type of loan, whether or not you have collateral, how good your credit is, etc. In some situations, the interest charge may be worth the convenience a loan gives you, but in a lot of cases, it adds a large amount of extra money to repay.

2.    Bad credit can limit you

The other negative aspect is that you rely pretty significantly on your credit score. Unless you own valuable assets that you can use to secure your loan, your credit rating is going to factor into a lender’s assessment of your application, and that can limit your chances severely. You may receive less money, be required to pay it earlier, or even get rejected entirely. Of course, you can always opt for bad credit loans, which specialise in granting loans to individuals with a poor credit history, but you have to be aware of their high interest rate.

In conclusion, both options have their merits that are worth considering, but they also have significant drawbacks that can put you off. Whether you’re better off saving up or getting a loan depends on your financial situation, ability to save or repay, as well as how you are planning on spending the money. Some purchases are better suited to financing through one option over the other, so you have to take every aspect into consideration. Read up on the PROs and CONs of both and carefully weigh your options before making a final decision.