Tips to Determine Whether Paying Cash or Getting a Loan Is Better for Your Purchases
In the Philippines, the statement “Cash is king” still carries plenty of weight. That’s why many Filipinos believe that if you can’t pay for something in full, you shouldn’t buy it at all. For the most part, this is actually solid advice. Cash purchases are straightforward: you pay once and the item is yours, with no future obligations. Loans, on the other hand, require you to pay monthly installments that can last for years.
Modern finance, however, has given Filipino consumers more options to navigate life’s uncertainties. And with faster loan processing and simpler digital banking, paying in cash isn’t always your best possible move. Moreover, given the rising cost of property, education, and healthcare, paying in cash is no longer as easy or practical as it used to be.
This is where credit tools like personal loans come in handy. These loans can help you preserve liquidity, spread out costs, or even build your credit profile so you can better handle future challenges. Still, you want to get a feel for when cash works best and when borrowing makes more sense. To that end, here are practical tips to help you weigh your options before you reach for your wallet or a loan application.
1. Check If the Purchase Fits Into Your Overall Budget
If paying in cash leaves you struggling to cover the essentials, a loan might be the safer option. On the other hand, if the cost of the purchase is well within your surplus funds, paying in cash is cheaper and avoids interest charges altogether. If you do need a loan, you can search for “lowest interest personal loan Philippines” to discover offers from digital banks like Maya. With Maya Personal loan, you can borrow up to P250k, payable for up to 24 months. This can help you keep your repayment costs to a minimum and have an easier time handling repayments through the Maya app.
2. Assess the Urgency
Urgent, high-priority purchases like medical equipment, essential home repairs, or work tools are a no-brainer. If you don’t have cash to spare, a loan is totally justified. Keep in mind that traditional bank loans may take a lot of time to process, so you may want to go with personal loans offered by digital banks (like the aforementioned Maya). These new offerings offer fast approval while being much safer and more transparent than typical payday loans, helping you bridge the gap if your savings aren’t enough.
On the other hand, if the expense can wait, then it should. Ideally, non-essentials and luxuries should always be paid for in cash.
3. Compare Loan Products Before Deciding
If you’re leaning toward borrowing, compare multiple offers for interest rates, repayment terms, and disbursement speed before you commit. Beyond quick approvals, digital banks often provide flexible terms and direct disbursement to your account, with more structure and transparency than informal borrowing.
Regardless of where you borrow, look beyond just the interest rate. Don’t forget to include processing fees, penalties, and other potential charges. If the total cost significantly increases the price of your purchase, reconsider whether the benefit justifies the extra expense and the length of your commitment.
4. Consider Whether the Loan Will Add Value
If the purchase can help you earn more or save on long-term costs, a loan can be an investment in your future. Examples include upgrading your laptop for freelance work or enrolling in professional courses. Again, purely luxury buys are usually better handled in cash to avoid paying interest on non-essential spending.
5. What’s Your Current Debt Load?
Adding a new loan when you’re already juggling multiple repayments isn’t ideal. Most lenders also look at your debt-to-income ratio when approving applications, so too much existing debt could limit your options. If your plate is already full, the only lenders who will extend credit to you will probably want to protect themselves by imposing higher interest and stricter terms. In these situations, cash is probably the wisest choice unless the need is particularly urgent.
6. Think About Your Impending Financial Commitments
If you have major, critical expenses coming up, like tuition fees or a business expense, say a payment for SEO services for your website, using a loan today can conserve your liquidity and help you more easily pay off important short-term expenses that come up later. Paying in cash now, on the other hand, might leave you scrambling for money when those future needs arise.
7. Review Your Long-Term Credit Goals
If you’re aiming for bigger loan approvals for property or car acquisitions, modest personal loan commitments today may help you build a stronger credit score years down the road. Just be sure to borrow from a regulated lender so that your repayments are properly reported to credit bureaus.
8. Match the Payment Method to the Situation
Lastly, for one-off, smaller-ticket items, cash is usually a lot simpler. If it’s a large, essential purchase that would dent your savings, a loan can be a smart way to spread out payments and maintain financial stability. Of course, this is contextual and depends on your savings, cash flow, and the specific type of loan. It’s worth mentioning that credit cards can be a more convenient way to pay compared to cash, especially with their rising acceptance among Filipino businesses.
Every Payment Method Has Its Moment
Paying cash does have its merits, but loans also have their place in smart money management. The right choice depends on what you want to achieve as well as the nature of the purchase. In any case, the important thing is to make sure the decision fully supports your long-term objectives.