Taking a Loan Vs. Using your Savings – Which is Better?

Managing your finances during times of crisis is indeed a tough challenge and requires a great deal of hard work, some serious discipline, and patience. Whether you need to buy a new home, go for an existing home renovation need funds for arranging a wedding, travel, higher education abroad, or tackling a medical emergency, everything needs funds to manage the situation at hand. While some of these expenses can be planned, there are rest which you’ve no control over and can crop up any time, like dealing with a medical emergency.

Those who have adequate savings at their disposal can take them out to meet such financial challenges but not all of us are that well prepared at all times. Also, exhausting your savings isn’t a great idea as that leaves you with nothing or little amount for any monetary challenges in the future. If you extract your savings from mutual funds or fixed deposits before time, you will lose out on the potential returns too.

The thought of paying either for a health emergency or a hefty purchase is linked to an array of choices. Cash or loan? Save or borrow? Many believe that first, it is better to save and buy to avoid falling into any debt. An expert’s view contradicts, as they believe that in reality there is a balanced answer to the saving-versus-personal loan question.

Pros & Cons of Using Savings

Many of us believe that spending our savings to handle the crisis at hand is a better choice than borrowing a loan as you’re free from paying monthly EMIs and also from the loan burden. Here are some of the pros and cons of using your savings:



Interest-Free Purchase – Suppose, if you want to buy an iPhone or any other expensive gadget and decide to apply for a personal loan for that, you need to pay the personal loan interest So in totality, you end up paying the Amount X + interest towards your purchase. If you decide to go for it from your savings, you don’t need to pay any interest and only the actual cost of the product.

Stress – Spending from your savings might feel burdensome initially but it relieves you from the prolonged stress of repaying the loan over the loan tenure. Also, there is a spending limit which you draw for yourself as you know your savings and how much you can spend.

Better Financial Wisdom – it’s easy to land up in a debt trap when you know that you’ve funding the current purchase with a loan that you’ve to repay in the future. This might lead to careless and needless spending habits if you’re not that good with maintaining financial discipline. However, savings end up making a person financially well disciplined by limiting to what you can afford and not overstepping the budget.


Savings Limit the Affordability – One of the biggest cons of savings is that you can only afford to spend what you’ve saved. People also advise you not to exhaust all your savings in one go and keep a backup too. Also, that limits your affordability and your wants to the extent of what you’ve saved which isn’t always feasible.

Dissolving Savings Takes Long – Very few people keep their saved amount in bank accounts and prefer to keep them invested in multiple forms like shares, mutual funds, real estate, gold, and bonds. Dissolving these savings into cash takes time and thus is a long wait which isn’t really a feasible choice when you need instant funds.

Interrupts Future Plans – If you’ve been saving to buy a new car, for home renovation, or to buy an expensive gadget/appliance, parting with that saving to meet another cause is a little daunting. It also hampers your future plans as you’ll have to start over again to save for the same cause. In such situations, going for a loan is a wise choice.

Pros & Cons of Availing a Personal Loan

Breaking the common myth that debt is a burden, if used appropriately, loans can help you leverage significant gains. Here are some of the pros and cons of taking a loan:


Not many are aware of the fact that a personal loan and home loan help you reduce the tax burden. Thus, taking a personal loan or home loan over savings is the best choice for professionals having high taxable income and are on the lookout for measures to bring down the taxable income.

Inculcates Financial Discipline – The decision of availing a debt requires a degree of financial discipline that makes the person realize and value the cost of every penny spent till the loan is paid off. If you look on the brighter side, taking a loan actually makes you financially responsible.

No Restriction on End-Use – Unlike a home loan or car loan, a personal loan doesn’t have any restriction on the end-use of the loan amount. Having the freedom to use the loan amount any way results in greater flexibility in spending.


EMI Burden – Loans come with the implication to pay the EMIs over the loan repayment tenure that can last from a few months to years. This means that the financial impact of one big purchase is tangibly felt over the next few months or till the loan is paid off. Diverting a substantial part of your income towards EMIs may seem like a burden for some. However, if you look in the hindsight, it is better to pay the EMIs over time than let go of your entire savings at once.

Requires a High Credit Score – Most lenders require and prefer the applicants to have a high credit score, over 630, to be eligible to apply for a personal loan. This may seem like a barrier to obtaining instant funds for those with a low credit score. Though it doesn’t mean that a low credit score doesn’t ensure loan approval, it will only get you high personal loan interest rates over others. Also, if you look at the positive side, in order to prepare for a personal loan, you’d get better financially disciplined to have a high credit score for easy personal loan approval.

Additional Costs – Some banks and NBFCs levy additional personal loan costs like prepayment charges, loan processing fees, and late penalties. Such costs only add up to increasing the overall loan costs for the borrowers. However, if you are always on time with your loan EMI repayment, you can skip the late payment penalty.

The Final Verdict

To have a final say on loans vs. savings, both savings and loans have their benefits as well as disadvantages. Weighing these options depends majorly on your financial status. Without having a financial strategy, spending all your savings or availing of a loan isn’t really a wise choice. If your situation demands instant funds, then you need to knock on the doors of one of the best loan providers in India and that’s where Clix Capital steps in to make things easy and hassle-free.


Easy Click with Clix Capital

Gone are those times when obtaining a personal loan was a daunting task. No more you need to stand in a long line with a bunch of documents. It’s all done with a click of your finger from the easiness of your home. There are simple ways to get a loan without any collateral and a sky-touching credit score.

Clix Capital, a reputed NBFC offers personal loans up to Rs. 10 lakhs that help you meet diverse financial needs health emergency, travel, wedding, higher education, etc.

Even with easy personal loan eligibility and minimal paperwork, we offer affordable interest rates at minimal charges.

Clix Capital offers instant loan approvals and speedy fund transfers to your bank account once your loan application is approved and the documents are verified.

You can choose your own EMI repayment procedure. To know how much loan amount you can avail, click here.

Improves Your Credit Score: When you take a loan and pay back the EMIs on time, your credit score improves automatically as you get to select your repayment tenure accordingly. So, obtaining a loan will all the more keep you financially fit as well as add to your creditworthiness.

Also Read: How To Improve Credit Score In 30 Days?

Clix Capital, your friendly personal loan provider, is a reputed NBFC that offers loans without any collateral, security, or guarantor. We provide loans that you can use to pay for emergency expenses as well as make large purchases. With easy eligibility conditions and minimal documentation requirements, we offer loan approvals instantly. Apply now to embark on the path of financial freedom!

For any queries, please find us on Facebook, Instagram, LinkedIn, Twitter, or WhatsApp. You can also reach us at hello@clix.capital.com or call us at +91-120-6465400 *T&C Apply.

October 11, 2022 Personal Loan 11410

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About Author


Ritesh Sharma hails from Delhi and has spent the last 9+ years helping brands achieve their business objectives through paid, earned and owned channels of Digital Marketing across industries including Mobile OEMs, Fintech companies, SaaS providers and F&B.