A lot of people believe that loans are only for those who don’t have enough savings. After all, many individuals use loans as a last resort when faced with unexpected expenses, or when they don’t have enough money saved for a major purchase.
However, loans aren’t only for those in financial distress. In some situations, getting a loan might be a better choice than using your hard-earned savings. Here are some circumstances in which borrowing money can be a smarter financial decision and be of great help in preserving your savings and maintaining long-term financial security:
1) Taking Advantage of Low-Interest Loan Opportunities
Many people think that loans often come with a high cost, which could lead them towards long-term debt. While this may be true for some types of loans, certain loans actually come with favorable terms that make borrowing more affordable and sustainable to pay off.
For instance, you can get a Maya Personal Loan with as low as a 0.77% add-on rate per month, with an effective interest rate of 1.4% per month. This means you can borrow money at a relatively low cost, which will allow you to meet your immediate financial needs while keeping your debt manageable and your savings intact.
If you’re looking for easy loans in the Philippines, this loan product is an excellent option. The application only requires you to have an upgraded Maya account and to use Maya actively for your transactions. You must also be between 21 and 65 years old to qualify for a Maya Personal Loan, and you must still undergo Maya’s credit evaluation process.
2) Financing a Big Purchase
Another scenario in which getting a loan can be a smarter choice than dipping into your savings is when you’re faced with financing a large purchase. Big-ticket items, such as a home, car, or even a home renovation often require significant capital, and although using your savings might seem like the most straightforward option, borrowing money through a loan will allow you more financial flexibility.
For example, a home loan (also known as a mortgage) allows you to purchase property and pay it off over a set period, often with lower interest rates compared to other forms of borrowing. In the case of a car purchase, loans often come with competitive rates, and the monthly payments can be structured in a way that fits your budget.
Either way, taking out a loan means that you can preserve your savings for emergencies, investments, or future financial goals, while still securing the items you need or desire.
3) Covering the Cost of a Major Life Event
Major life events—such as a wedding, the birth of a child, or an unexpected medical emergency—
can all bring about significant financial expenses. In such cases, taking out a loan will allow you to better manage the immediate costs.
Paying for any of these major life events out of pocket could strain your finances, but a loan will allow you to spread the payments over time since they’ll come with structured repayment terms and fixed interest rates. The predictability and flexibility will reduce the immediate financial burden on you and allow you to handle life’s important moments without risking your long-term financial stability.
4) Starting or Expanding a Business
For many entrepreneurs, it may not be feasible to use one’s savings to fund their business goals. In your case, tapping into your personal savings may limit the growth of your potential business venture as well as risk your personal financial security. As such, if you’re thinking about starting or expanding your business, taking out a loan for an aspect of the seed stage may be a more practical and strategic option.
Business loans, particularly those with lower interest rates, can provide you with the capital you need to start operations, hire employees, or invest in inventory or equipment. The loans can also be used to capitalize on new opportunities and scale quickly in order to meet revenue potential. With the right financing, you can increase your production, enhance your marketing efforts, or enter new markets—all of which can give your business a stronger and more profitable start.
As with any business decision, it’s essential to weigh the potential return on investment (ROI) against the cost of borrowing to ensure that the loan actually supports the business’s profitability.
5) Building or Improving Credit Standing
Taking out a loan and repaying it responsibly can help you demonstrate your ability to manage debt and improve your credit standing—something you’ll want if you intend to apply for other types of financing in the future. A good credit standing signals to lenders that you’re a trustworthy borrower who’s capable of making regular payments and handling their financial obligations responsibly.
Your positive track record with debt will make you more likely to qualify for future loans with better terms, such as lower interest rates or higher borrowing limits. To this end, there are several things you can do to improve your credit standing. One of the most important is to make timely payments, which helps establish a history of reliability on your part.
It’s also a good idea to keep your credit utilization low, as this shows that you’re not overly dependent on credit and can manage your available credit in a responsible manner. Together, these practices will build you a solid foundation for a healthy credit profile.
The scenarios highlighted in this article show how loans can provide you with some much-needed financial support so that you won’t have to deplete your savings or experience significant financial strain in your life. With proper management, a loan can actually help you achieve your financial goals more easily and pave the way for even better financial opportunities to happen to you in the future.
