Should You Dip Into Savings or Use a Loan? How to Decide

Being a high earner doesn’t necessarily mean you have a hefty savings account in place. In fact, only 25% of those earning $100,000 feel they have enough savings to cover three months of expenses, according to a recent Economic Well-Being Report from the Federal Reserve.

A survey of BHG Financial customers revealed that 68% of those earning $100,000 or more have $10,000 or less available in their checking and savings accounts. So, what’s the reason behind the lower savings and lack of financial confidence for high earners?

Even if you make six figures, financial stress still exists; it just looks different. There’s pressure to support others (parents, kids, etc.) while also juggling higher everyday expenses like mortgages, school tuition, and lifestyles. Many higher earners are low on liquidity, making it harder for them to finance unexpected expenses.

In some cases, it’s a good idea to leverage the savings you’ve worked so hard to collect. By doing so, you can:

Avoid borrowing cost

The general rule of thumb is to save at least three-to-six months of living expenses reserved for emergencies—and even more if you’re an entrepreneur, self-employed, or have an unpredictable income stream.

If you’re confident your expenses won’t deplete this amount, you could use your savings to cover it. Otherwise, it may be better to keep your savings intact and find alternative financing options.

Enjoy immediate, no-cost access

When you use your savings for an expense, you avoid the additional costs that usually come with loans and credit cards, such as interest and fees. If you have a small or one-off expense that won’t derail your financial cushion, paying for it with your savings could save you thousands of dollars in the long run.

“A loan can be a useful tool, but you must know when to deploy that tool. A hammer is a useful tool, but I don’t use it to replace a light bulb, I prefer a ladder,” says Den Murley, certified financial planner at Belonging Wealth Management.

Here are a few ways to decide if a personal loan is the better option for you compared to using savings or credit cards:

Preserve long-term reserves

If you opt for a personal loan, you won’t have to deplete your cash reserves to fund an expense. Plus, as a borrower with good credit, you may be able to get a personal loan with a competitive interest rate.

Balanced cash flow

One benefit of a personal loan is the predictable repayment schedule. Most unsecured loans have fixed monthly payments that help you stick to a budget. If you have to pay for something with financing, a fixed-rate installment loan may feel safer than other options like credit cards where the APR and repayment schedule can vary.

Lower interest than credit cards

Personal loan APRs tend to be lower than credit cards. The average credit card APR is just under 22%, according to the Federal Reserve Bank of St. Louis, and the average personal loan APR for those with prime credit is about 11% to 15%. A lower, fixed-rate loan saves you a great deal of interest, helping you keep your savings in good shape.

FYI: BHG Financial’s personal loans for debt consolidation are a great option for those struggling with high-interest credit card debt. Consolidate multiple debts into a new loan with better terms, including a fixed rate, a flexible repayment period, and one low monthly payment.

Follow these steps to help you determine whether you should tap into your savings or take out a loan instead.

1. Evaluate your buffer

Audit the amount in your savings accounts, as well as your current and upcoming financial obligations, to determine whether you can afford to withdraw some or all of it.

If dipping into savings would risk your emergency fund, a personal loan may be a better way to fund your expenses and maintain your savings.

2. Calculate real cost

Compare a loan’s interest and fees to the cost of not having enough cash on hand or a financial cushion. Prequalifying can help you see if the loan terms would be favorable. If the benefits outweigh the risks, it may be worth considering.

3. Prioritize peace of mind

Consider how each option will affect your stress levels. For some, using savings feels safer than the multi-year commitment required to repay a loan. For others, a personal loan is less stressful for depleting cash reserves. Choose the approach that feels right for you.

“Whatever option you choose shouldn’t keep you up at night,” says Murley.

4. Review your goals

Lastly, think about what you hope to achieve financially.

“Ask yourself, ‘Will future me appreciate what current me is doing?’ This is a favorite question I like to ask myself. It’s important to balance your current self with your future self before you make any financial decision like pulling from savings or taking out a loan,” says Murley.

Using your savings makes the most sense for manageable, one-off costs. When larger, strategic, or unexpected expenses pop up, a personal loan is likely your best bet. You’ll protect your liquidity and ensure financial flexibility while empowering yourself to live fully without compromise.

Ready to explore the possibilities? BHG can help. See your personalized offers in just seconds without any impact to your credit.^3,4