Should You Use Savings or Take a Loan? | MoneyMart Asia

You need RM10,000.

You also happen to have RM15,000 sitting in savings.

So what should you do?

Use RM10,000 of your savings?

Or:

Keep the savings and borrow RM10,000 instead?

At first, the answer seems obvious.

Why pay interest to borrow money you already have?

But using your savings could leave you with only RM5,000 in cash.

If something unexpected happens next month, you may suddenly wish you had kept more of it.

This is why the real question isn't simply:

“Do I have enough savings to pay for this?”

It's:

“How much of my savings can I safely use without weakening the rest of my finances?”

Your Savings Balance Isn't Necessarily All Available to Spend

Suppose you have:

RM15,000 in savings

and need:

RM10,000

It can feel as though you have RM5,000 more than you need.

But what is that RM15,000 actually for?

Perhaps:

RM8,000 is your emergency fund.

RM3,000 is set aside for annual insurance, road tax and other upcoming bills.

RM2,000 is for a planned family expense.

That leaves only:

RM2,000 genuinely unallocated.

Suddenly, spending RM10,000 looks very different.

A bank balance doesn't tell you how much money is truly available.

Some of it may already have a job.

Why Using Savings Usually Has One Big Advantage

Borrowing money costs money.

If you already have genuinely surplus cash available, using it can avoid:

• Interest or financing costs

• Fees and charges

• Monthly repayments

• Another financial commitment

• The risk of late payments

Consider a simplified example.

You need RM10,000.

You could use RM10,000 of excess savings.

Or you could borrow RM10,000 at an illustrative 6% flat rate over three years.

Interest:

RM10,000 × 6% × 3

= RM1,800

Total repayment:

RM11,800

Using your own RM10,000 therefore avoids approximately RM1,800 of interest in this simplified example.

If the money is genuinely sitting idle and isn't needed for anything else, borrowing simply to avoid touching it may be an expensive way to preserve a number in your savings account.

But Cash Has Value Too

Now let's change the scenario.

You still have RM15,000.

But that's your entire liquid savings.

You spend RM10,000.

You're left with:

RM5,000

Two weeks later, your car requires a major repair.

Then a family emergency appears.

Then an unexpected household expense arrives.

Suddenly your RM5,000 buffer starts disappearing.

Cash provides something that doesn't appear neatly in an interest-rate calculation:

flexibility.

Once savings have been spent, getting that liquidity back may take months or years.

This is why preserving some cash can have genuine financial value.

Your Emergency Fund Deserves Special Treatment

Emergency savings shouldn't automatically be viewed as spare money simply because it's available.

Its purpose is to protect you when something unexpected happens.

That might include:

• Loss of income

• Medical expenses

• Urgent home repairs

• Major car repairs

• Family emergencies

• Other unavoidable costs

Suppose your essential monthly expenses are RM4,000 and you have RM12,000 saved specifically as an emergency fund.

That represents roughly three months of essential expenses.

If you spend RM10,000 of it on something non-essential, you're left with only RM2,000.

You didn't merely spend RM10,000.

You also removed most of the protection your emergency fund was designed to provide.

That doesn't automatically mean borrowing is better.

It means the decision needs to account for what the savings were protecting you from.

What Are You Spending the Money On?

Purpose matters.

Compare these situations:

Scenario A: Your refrigerator suddenly fails.

Scenario B: You want a more expensive television.

Scenario C: You need urgent dental treatment.

Scenario D: You want to upgrade to a newer phone.

Each may involve the same RM5,000.

But financially, they aren't the same decision.

Before deciding whether to use savings or borrow, ask:

Is this expense necessary?

Is it urgent?

Can it be postponed?

Can I spend less?

Sometimes the best choice isn't:

Savings or loan?

It's:

Neither — don't spend the money yet.

The Third Option Is Often Overlooked

Financial decisions are frequently framed as two choices.

Pay RM10,000 cash.

Or borrow RM10,000.

But there may be a middle ground.

Suppose you need RM10,000 and have RM20,000 saved.

Instead of spending the full RM10,000 or borrowing the full RM10,000, perhaps you:

Use RM6,000 of savings

and finance RM4,000.

Whether that particular split makes sense depends on the financing terms and your circumstances.

But conceptually, it demonstrates something useful:

Financial decisions don't always need to be all-or-nothing.

You may be able to reduce the amount borrowed while still preserving an appropriate cash buffer.

What About Keeping Savings Invested?

This introduces another common argument.

Someone may say:

“Why use my investments? They're earning money. I'll borrow instead.”

Potentially.

But the comparison needs to be realistic.

Suppose borrowing costs you an effective 10% per year.

You keep your RM10,000 invested because you expect it to earn 7%.

At first glance, keeping the investment sounds sensible because your money continues growing.

But you're paying approximately 10% to preserve an asset expected to earn 7%.

And investment returns generally aren't guaranteed.

The borrowing cost, meanwhile, may be contractual.

So don't compare:

Guaranteed borrowing cost

with

optimistic investment return

as though they are equivalent.

The relevant comparison is risk-adjusted and after considering fees, taxes where applicable, liquidity and uncertainty.

What About Fixed Deposits?

This comparison is often easier.

Imagine you have RM20,000 in a fixed deposit earning 3% per year.

You need RM10,000.

You're considering borrowing at an effective cost materially higher than 3% purely because you don't want to disturb the deposit.

You may be paying substantially more interest than your savings are earning.

There can still be reasons to preserve cash — including emergency liquidity or early-withdrawal consequences.

But mathematically, the difference deserves attention.

Don't pay RM1 to protect 30 sen without understanding why.

“I Don't Want My Savings to Go Down”

This is understandable.

Building savings takes time.

Watching RM30,000 become RM20,000 overnight can feel painful.

Borrowing allows the RM30,000 balance to remain untouched.

Psychologically, you can still feel as though you have RM30,000.

But your net financial position has changed.

If you have:

RM30,000 cash

and

RM10,000 new debt

you aren't in the same financial position as someone with:

RM30,000 cash

and

no debt.

Looking only at the savings side of your finances can create an illusion.

Assets matter.

But liabilities matter too.

Borrowing Can Protect Liquidity — But at a Price

There are legitimate situations where someone may decide that preserving cash is worth the borrowing cost.

For example, perhaps:

• Your income is temporarily uncertain

• You have large unavoidable expenses approaching

• Using cash would wipe out your emergency reserves

• You need liquidity for your business

• Rebuilding the savings would be difficult

• The financing cost is relatively low and manageable

In these cases, you're effectively paying for the ability to keep cash available.

That's not automatically a bad decision.

But recognise what you're buying:

Liquidity has a price.

The question is whether that price is worth paying.

Don't Keep RM20,000 in Savings While Carrying Expensive Debt Without Doing the Maths

At the other extreme, some people build savings while simultaneously carrying expensive debt.

Saving is generally a good habit.

But imagine you're earning a modest return on cash while paying a much higher rate on outstanding debt.

Part of your financial position may effectively be moving backwards faster than the other part is moving forwards.

That doesn't mean emptying your emergency fund to clear every debt immediately.

It means looking at your finances as one complete picture rather than treating savings and borrowing as unrelated.

Try the “After” Test

Before using your savings, don't focus only on today's balance.

Ask:

What will my finances look like immediately after I spend the money?

For example:

Savings today:

RM25,000

Expense:

RM15,000

Savings afterwards:

RM10,000

Then ask:

How many months of essential expenses does RM10,000 cover?

What major bills are coming?

How stable is my income?

How quickly could I rebuild the RM15,000?

Would another RM5,000 emergency force me to borrow anyway?

The answers help determine whether using the savings is comfortable or leaves you financially exposed.

Then Try the “Borrowing” Test

Now look at the alternative.

If you borrow instead:

How much will you receive?

What's the monthly instalment?

How long will you repay it?

What's the effective cost?

What's the total repayment?

What fees apply?

How much financial flexibility does the monthly repayment remove?

Now you're comparing two complete scenarios rather than simply:

RM10,000 cash vs RM10,000 loan.

A Simple Decision Framework

If you're deciding whether to use savings or borrow, consider these questions:

1. Is the expense necessary?

If not, postponing it may be better than either option.

2. Is the money genuinely spare?

Separate emergency funds and money already reserved for upcoming obligations.

3. What would my savings look like afterwards?

Don't leave yourself unnecessarily vulnerable.

4. What does borrowing actually cost?

Look at the effective cost and total repayment, not only the monthly instalment.

5. How quickly can I rebuild the savings?

Someone who can replenish RM10,000 within a few months faces a different decision from someone who took five years to save it.

6. How stable is my income?

Greater uncertainty can make liquidity more valuable.

7. Could I use some savings and borrow less?

Don't overlook the middle ground.

The Cheapest Answer Isn't Always the Safest Answer

Using savings is often mathematically cheaper than borrowing because you're avoiding financing costs.

But personal finance isn't only about minimising interest.

It's also about maintaining resilience.

Spend too much of your savings and you may leave yourself exposed.

Borrow unnecessarily and you may pay interest simply to keep excess cash sitting untouched.

The goal is to find the balance.

Enough savings to protect yourself.

As little unnecessary debt as reasonably possible.

And enough monthly breathing room to continue living normally after the decision.

So when deciding between savings and borrowing, don't ask only:

“Which one costs less today?”

Ask:

“Which choice leaves my overall finances stronger tomorrow?”

That is usually the more important question.

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