Taking a Loan vs. Using Your Savings – Which Is Better?
Published on : September 07, 2023

Financial crisis management is a challenging task that calls for dedication, strict discipline, and hard work. Whether you need to buy a new home, renovate the existing home, need funds for arranging a wedding, travel, or tackle a medical emergency, everything needs funds to manage. While some of these costs can be anticipated, others are beyond your control and may arise at any time. The main concern that arises in emergency situations is whether we should use our money or take out a personal loan. When it comes to the choice between taking a loan and using savings, there is no perfect choice. Below, we have explained the pros and cons of using your savings and taking a personal loan so that you can make an easy decision.

Pros of Personal loans


Perhaps the finest option for financing your goals is a personal loan, which you can use for various purposes. When it comes to how the money can be used, the majority of other loan alternatives are limited, but with a personal loan, you are free to use your money as you see fit.

Quick Processing

With banks and NBFCs streamlining the procedure, obtaining a personal loan can be done quickly. With LoanTap, you can get a loan sanctioned within 24-36 hours after completing all formalities.

No Security Required

When it comes to pledging collateral, many people can be sceptical. There is no need to put up any collateral when applying for a personal loan. Candidates who meet the requirements can secure funds without putting up any security.

Simple documentation

Documentation is a lengthy process that most borrowers want to avoid. LoanTap offers personal loans with minimal documentation.

Cons of Personal Loans

Strict Eligibility Criteria

When it comes to the requirements for receiving personal loans, lenders adhere strictly to the rules. The majority of banks demand a specific level of income, and applicants’ credit histories may need to be scrutinised. This is because lenders need to be certain about the borrower.

Long-Term Commitment

Managing a personal loan can be difficult for individuals with fluctuating or unstable incomes.

Pros of Using Savings


By using your savings, you can save money otherwise paid on interest. Additionally, other than the interest rate, you will also be saving money on processing fees and additional charges.


Credit scores are no longer relevant to you when you are using savings. You don’t need to be concerned that late payments may lower your credit score. You also don’t need to worry about how having bad credit will affect your ability to borrow money in the future. Moreover, there is no need to worry about repayment.

Cons of Using Savings

Limits Your Affordability

You can only afford to spend the money you have saved. In such a situation, it will restrict your spending as you cannot spend more on your savings. It can result in losing the opportunity to purchase what you need. Moreover, if an emergency requires higher spending, relying on savings may not be enough.


You are likely to have savings in the form of fixed deposits, shares, mutual funds, and more. Along with it, saving a substantial amount takes time. If you urgently need funds, dissolving these savings may not be fast and convenient. In such situations, a personal loan may come in handy when you lack liquidity.

Disrupts Long-Term Financial Plans

There may be situations that can deplete your entire savings, disrupting your long-term financial plans. For example, if you are planning to renovate your house but a medical emergency arises, you will have to use your savings, and the original plan you had for those funds will be disrupted.


As discussed above, no one way fits all. It completely depends on needs and financial requirements, and it may vary from individual to individual. While some consider taking a loan riskier and prefer to use savings, others find it beneficial to take a personal loan. In either case, you must have a clear financial strategy and check on your savings, interest rates, income, and funding options available to decide what best suits your interests.

If you are considering getting a personal loan, LoanTap can help you get one at affordable interest rates.