Getting financial order is a difficult task and needs a lot of time, discipline, and hard work. Everything requires capital to organise a wedding, renovate your house, fund education or vacation, consolidate debts, or pay for a medical emergency. While some prefer taking care of these expenses from their savings, others decide to borrow money by taking an instant personal loan. The question is, which one is the more lucrative option? People who do not want the pressure of a loan repayment prefer paying from their savings, but borrowing money seems to be the better course of action for many reasons.
To help you make an informed decision, we will try to explain both the options.
Pros of Paying from Your Savings
When you pay from your savings, these are some advantages that you can get:
No Interest to Pay: When you take an unsecured personal loan, you have to pay an interest amount along with the principal amount you borrow. Whatever expense you want to make, you can pay the entire amount from your savings without any worry to repay it.
No Need to Share Your Future Income: Loan EMIs may take a high percentage of your monthly income over the coming months or years. However, if you pay from your savings, there is no repayment with EMIs.
No Tension: When you pay from your savings, you have no worries about repaying anything to anyone. You are saved from the stress of managing finances and adjusting EMIs in your monthly budget.
No Need for Credit Score: When you use your savings, you don’t need to prove your creditworthiness to anyone by having a high credit score. No matter what your credit score is, you have your money to pay for the desired expenses.
Cons of Paying from Your Savings
Since you must have worked hard to build your savings, you should think twice before spending them at once. Here are a few cons of paying from your savings:
Limited Affordability: When you pay from your savings, the amount of your savings limits your wants and desires. If an emergency arrives and you need a higher amount, your savings may not be enough.
Longer Procedure: You must have kept some part of your savings in your bank account and invested some in bonds, shares, gold, real estate, mutual funds, and others. When an emergency arrives, liquidating these assets to get the needed cash may take a long time. So, when you need money urgently, relying on your savings may not be a good idea, as now you have the option of instant personal loan approval within minutes.
Hampers Long-Term Goals: If you have been saving money for years to buy a home or another big-ticket asset, using your savings to pay for an unexpected expense may hamper your long-term goals.
Benefits of Taking a Loan to Pay for the Expenses
Many people avoid taking a loan due to fear of debt. However, if planned appropriately, they can help you financially in times of need and also improve your financial standing by increasing your creditworthiness. Let’s take a look at the advantages that personal loans come with over savings:
Less Expensive: You obviously need to pay an interest rate on the amount you borrow, but that might be lower than the interest you would have earned on your savings. Wherever you have invested your money, you must earn an interest rate or make a profit due to appreciation over time. However, when you use up your savings, you lose that profit. As a result, spending from your savings proves to be more expensive than taking a loan and paying it with the interest rate.
Fast Approval: As compared to liquidating assets to get the money you need, NBFCs these days allow online loan application with instant approval within minutes. For instance, Clix Capital offers easy to apply for personal loans that they can approve in 15 minutes*. So, you can entirely rely on personal loans to meet your urgent financial requirements.
Repayment in Easy EMIs: Instead of spending a considerable amount from your savings, you can take a loan now to cover the expenses and repay it to the lender in easy EMIs spread across months or years. So, you can cover your expense now without touching your savings and repay the borrowed amount easily over a period you can choose according to your repayment capacity.
Improves Credit Score: Saving money or using up your savings does not have any impact on your credit score. However, when you take an unsecured personal loan and repay its EMIs on time, it becomes a valuable tool that can help improve your credit score. Since you can select your repayment term according to your repayment capacity, you should not have any problem repaying its EMIs on time. Personal loan can help you improve your score not only because you can repay its EMIs but also because it diversifies your credit profile. Both these factors are vital parts of your credit history.
So, if you want to save your savings and stay financially fit in the long run, consider taking a personal loan for your expenses instead of paying from your savings. For instance, taking a personal loan for home renovation can help you upgrade your house the way you want, and you need pay its price over 12 to 48 months of loan tenure at Clix Capital. When you pay its EMIs regularly, you also add value to your creditworthiness by improving your credit score.
Clix Capital is a reputed NBFC that offers instant personal loan without any collateral, security, or guarantor. We provide personal loans of up to ₹ 25 lakhs that you can use to pay for expenses like education, vacation, home renovation, medical emergency, wedding, or debt consolidation. With easy eligibility conditions and minimal documentation requirements, we offer loan approvals in 15 minutes*.
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You can also reach out to us at hello@clix.capital or call us at 1800 200 9898
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