3 Ways Loans and Savings Go Hand-In-Hand in Building Wealth

Building wealth can be challenging, but having the right tools is the first step. Racking up savings is a common practise, but there is something else that can help you become wealthy.

Surprisingly, loans from legalised money lenders in Singapore can actually be your friend in the wealth-building process. Here are three ways this is possible. 

They can both help you purchase assets

Both savings and loans can help you acquire assets – things that can make you money. For example, you want to start a baking business. To start, you will need baking equipment and supplies. That may cost a lot of money in the beginning.

If you have substantial savings, you can use that to buy ingredients, for example. Afterwards, you realise that you need a new oven, but you’ve used up most of your savings to buy the ingredients. This is where a loan can come in. You can take out a loan to buy a new oven. With that, you have what you need to start selling pastries.

Because the oven helps you create products to sell, it’s an asset. It’s a tool that lets you make money. You can then use part of your pastry sales to pay down the loan. Soon enough, you will repay the loan in full  while the oven continues to help you make more money. At this point, your income will increase because you don’t have a loan to repay anymore.

They help you weather financial storms

Loans can also work alongside savings to help you go through financially challenging situations. Suppose a family member needs urgent medical care. If you have an emergency fund, you can cover the medical bills more easily. 

In case your emergency funds are not enough, you can dip into your savings to cover the remaining expenses. And if your savings happen to run out too, you can take out a small loan to cover whatever cost is left. 

In this situation, your emergency funds and savings let you take out a smaller loan. Big loans are harder to pay off, especially if you took one out in an emergency. On the other hand, the loan also helped you out by covering whatever medical expenses you could no longer afford. The loan prevented you from owing money to the hospital.

Having both helps you build a good credit score

If you take out loans and repay them in a timely manner, you are doing your credit score a huge favour. Each repayment made on time makes your credit score climb. You can use your savings to help you to always make the monthly repayments on time and in full. 

With a high credit score, you will get more favourable terms the next time you apply for a loan. Also, you may qualify for lower interest rates, reducing the overall cost of future loans.


It’s good to build up your savings and use loans wisely, as both of them can contribute to building wealth. Playing your cards right will help you create a bright financial future. These three ways are how you can use loans side-by-side with your savings to reach your financial goals.

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