Saving or penny-pinching is one of the oldest pieces of advice in finance. With a savings account, you’ll have a stashed fund that can be used for emergencies. However, there are some cases when saving is not the most effective course of action. Emergencies, for example, can be resolved by getting the right kind of loans.
Here are some reasons why getting a loan is better than penny-pinching:
Penny-Pinching Won’t Let You Beat Inflation
Whether you’re aware of it or not, inflation is a deeply-rooted problem that cannot be solved quickly. It’s the consequence of humanity’s progress, and the ever-growing puzzle in finance. If you love to pinch pennies hoping to prepare yourself for yearly inflation, you must think again. Any amount you save is helpful but it cannot beat inflation. Every year, prices increase, triggering a set of chain reactions globally. In this case, loans are better but only if they are used wisely. Hopefully, your current savings can be used to pay off any loan you have.
Loans Can Be Turned into Investments
What is the best way to use a personal loan in Singapore? Treat it as an investment, rather than something you can spend. Nowadays, there are countless of ways to use your loan as an investment. Some of the best examples are online business, online assets, dropshipping, buy-and-sell, crafts, item flipping, and skilled services. Basically, anything that can multiply the total value of your loan so that you can repay it and you’ll have a little extra to spend.
Your savings can also be used to fund your investment. However, with the numbing effects of inflation, you may get lesser value. For greater effect, you should combine it with a substantial loan.
Loans are Somehow Rewarding
For many people, payday loans are more rewarding than saving. This has something to do with the way our brains are wired. Loans kick off our reward hormones, while saving depletes them. Penny-pinching has its rewards, but you’ll only reap it at a later time – unlike loans where gratification is instant. Even though loans are rewarding, you need to be careful. Consider loans as emergency solutions, and not crutches that you can use all the time. To make sure that you won’t rely on loans often, you need to have a contingency fund. Apparently, penny-pinching can help you with this.
Credit Rating is Boosted by Loans
While penny-pinching has its fair share of advantages, it can only help you in limited instances. Once you’ve applied for loans and repaid it well, you’ll have a better credit rating. In turn, a better credit rating will put you in an advantageous position so you can borrow other types of high-end loans. Lenders also trust borrowers who have a clean credit rating. Saving, no matter how often you do it, won’t affect your credit rating.
Alas, penny-pinching isn’t all that bad. The amount of money that you can save per month can help you deal with growing expenses. The real trick is to keep your penny-pinching tactics within reason. Don’t focus entirely on what you can save. Rather, you should focus on how you can grow your income with the current cash at hand.