Break Your Savings Or Take A Loan

Forget “Why do we exist?” or “Melody itni chocolatey kyun hai?”, this 👆 right here is the most important question. All of us save in one way or the other, either FD, RD, mutual fund investment or even gold. Some of us even have an account where we keep the money we have saved each month. And in the words of MC Hammer – U Can’t Touch This!

But sometimes we bump into unplanned expenses. It could be a broken phone or a damaged car or a medical emergency or god forbid, all three together. Such situations could lead us to take money from our savings. Is it better to just take a loan? Unfortunately, the answer is not a simple one.

Here are things to keep in mind when making a decision

Using your savings

Advantages

• No stress of EMIs
  One of the biggest advantages of paying from your pocket, you can shop or pay for what you want without paying interest. Also, you don’t have to worry whether you will have the money to pay for the EMI in the future.

• No credit score required
  You also don’t have to check or make sure you are credit-worthy. Taking from your savings means you don’t have to answer to anyone.

Disadvantages

• Limited liquidity
  You only have access to the limited amount you have saved. What if the expense you will incur is more? Also, many savings are tied to investments that if withdrawn before time will lead to penalty fees. Some of these assets are also hard to liquidate.

• Takes longer to reach goals
  Unless you have an emergency fund for unexpected expenses, most often savings are made towards a goal like a vacation or a home remodel. When you dip into those savings, your goal takes longer to achieve.

Taking a loan

Advantages

• Better option for the long term
  Saving money for your goals takes time, you might even miss out on what you need since you won’t have enough saved. With a loan you get the money you need right away and get the time to pay for it.

• Can be used for tax deduction
  Many don’t know this, but a personal loan for specific uses like home renovation, purchase of gold, jewellery and shares are exempted from tax. Interest paid for these are seen as the cost of asset acquisition.

Disadvantages

• Payment of EMI
  You will be tied to EMIs and have to ensure timely payments so that you don’t have to pay additional charges or even prepayment charges.

• Credit score required
  The process to get a personal loan can be difficult since you will have to go through bureau checks, credit reports and other necessary checks. It could be time-consuming and frustrating.

As you can see both options are great and not so great. The best bet would be to use one according to your situation. If you have an emergency fund, go ahead and use it after that is the use of such fund. If you don’t and need to make a substantial expense, you can take part of it from your savings and part of it can be a loan. This way your EMI is also reduced and yet all your savings do not get used up in one go.

But if you are thinking, who will give you a Personal Loan like that. Well, we are here to help you. Our different Personal Loan categories help you take the loan that you need. The process is simple, completely digital and gets over in like 5 minutes. You get anywhere from Rs.20,000 to 10 lacs credited directly to your bank account. The best part, you don’t need any security!