Loans Versus Savings in Emergencies: Pros And Cons

Some emergency expenses are unavoidable.  It could be a sudden medical expense, a car breakdown or unexpected home repairs. In these situations, we can either tap into our emergency savings or take out a loan from a legalised money lender in Singapore. That is, of course, highly dependent on our individual financial situations. Thus, it’s important to know the pros and cons of both sources of funds for emergency expenses. 

How can savings save you?

It is frustrating when one of your appliances breaks just as when you need them the most. One day your washing machine is working so well, the next day it decides to take a vacation. Emergencies can range from this one to an even larger situation. But if you have some cash stashed away, that is a relief, right?

Having an emergency fund gives you peace of mind knowing you have a financial cushion should a challenging situation come your way. You can focus on resolving the issue without the unnecessary extra financial stress.

Moreover, unlike loans, you do not need to pay interest charges. You can appreciate this perk in the long run when you compute how much of your money goes to interest instead of your pocket!

However, dipping into your savings might affect your goals. You may have them saved up for putting up a business or an out-of-country trip. But it is better this way because the effect is only temporary, and the alternative is to have debt.

When loans become necessary

There is no shame in borrowing money, of course. Emergencies can be overwhelming sometimes. Worse, they often exceed your savings capacity. That is why taking out a loan can be a viable option.

Let’s say you had a medical procedure or an extensive home repair. Usually, these situations entail significant costs, and your savings might not be enough. With loans, you may be able to cover the expenses while having more space to manage the situation.

Loans work well in time-sensitive emergencies, too. You can collect the money you need quickly without delay.

It is all about context

Every emergency needs differ, so of course, your approach to this may not be the same as others who have weathered such circumstances before you. The best way to choose is to compare your specific situation to your overall financial health.

Consider the urgency. Is it immediate? Maybe it can wait while you rebuild your savings. If the cost is more than your current savings, how much? Are you comfortable taking on additional debt? If yes, that can still depend if you have a stable income.

These questions are helpful when making a decision. If still unsure, it never hurts to ask for advice from financial experts like licensed money lenders in Toa Payoh.


Who likes to deal with financial stress? Literally no one. It is one of the most unenjoyable aspects of life. But hey, it happens even to the best of us.

So, whichever option you choose, remember that preparations go a long way in making a more secure financial future. Hope this blog helps!

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