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Using Emergency Funds Vs Getting a Cash Loan in Singapore

5 min

It is important to many of us to keep aside funds in case any unfortunate circumstances arise. Such a rainy day fund is not only a good to have but a necessity in Singapore, where the costs of living are high.

But sometimes, despite our best efforts, certain emergencies cost more than we have saved up for, such as health conditions or unfortunate accidents. Or you may find yourself in need of funds for multiple emergencies at once. This is when a cash loan can come in handy.

In this article, we lay out certain factors to consider when you’re trying to decide between applying for a quick cash loan in Singapore and using your rainy day funds.

Ask yourself: Is it truly an emergency?

The first assessment to make is whether or not your situation qualifies as an ‘emergency’.

Take, for example, the case of someone wishing to buy a new car. In most cases, especially in Singapore with our great public transport system, this would not be considered an emergency purchase. The exception is if the person is a taxi driver or Grab or Gojek private car driver. If the earnings from his or her vehicle are their primary source of income, a car may certainly be considered an emergency purchase.

For such instances, licensed moneylenders offer a Grab/Gojek/Taxi loan specifically for people in this situation. If you fall within this category, it makes sense to apply for a cash loan in Singapore instead of dipping into your emergency fund because the loan amount can be used to buy a car as well as cover other relevant costs such as maintenance, repairs for accident damage, and insurance.

But for those whose livelihoods do not depend on the car, and if they do not have sufficient funds saved up, they might wish to consider waiting until they have racked up some more dollars before purchasing a new vehicle.

Figure out what you stand to lose

For financially savvy folks, their savings or emergency funds are often parked in high-yield accounts. This may be in the form of savings accounts, fixed deposits, or even a salary bank account. The terms and conditions are usually consistent here – any withdrawal before a set date requires the account holder to forfeit some or all the interest accrued up to that point.

In such instances, not only do you lose the principal amount in the account (because it gets spent on the emergency need) but also the interest earned.

The same holds for mutual funds, stocks, or other kinds of investments. These are long-term investments that have the potential to grow significantly over the years. Cashing out on them today squanders all the potential earnings away in an instant.

So you have to ask yourself if you are willing to sacrifice it all, or whether a cash loan might be the better option. The answer will depend on the amount invested, and the type and terms of the investment. Understanding the possible cost-benefit ratio is important before choosing one route over the other.

Understand what you will learn by taking a loan

A loan is not simply a matter of cash changing hands; the move demands discipline on your part. It takes dedication to honour your loan commitments.

You will develop a sound understanding of your financial circumstances, the knowledge that will spread to your overall fiscal reality and guide your spending behaviour. What you learn when you take and repay cash loans cannot be learned through reading or hearing about it.

On the other hand, dipping into your emergency fund is a break of discipline. It is the easy way out from what may well be a temporary setback that does not teach you anything about how to handle money. Worse still, it could lead to a damaging domino effect on the rest of your savings.

Of course, in cases of true emergency, this consideration may well and reasonably be overlooked.

Be aware of the domino effect

White dominoes falling on a silver background

Perhaps the worst consequence of using your emergency funds is the psychological impact of taking that step. Creating an ‘emergency fund’ has no real value if you crumble every time money is tight.

With the spell broken once, you will be exponentially more likely to break the piggy bank in the future. So you must know and accept the possibility of such a scenario playing out again. Alternatively, you could get a quick cash loan in Singapore as a one-time fix.

The advantage of using emergency funds

Many people use their emergency funds instead of getting a cash loan in Singapore because of three main reasons:

  • No interest – You are using your own money, which does not incur any interest
  • Credit scores are immaterial – There is no assessment and approval process to use your own emergency funds
  • Instantaneous – Besides the time it takes to withdraw the emergency funds, there is no waiting involved

Making the decision

Considering the advantages highlighted above, the most important one being not having to incur external debt, the best solution for an emergency is to use your rainy day fund. But the occasion must indeed be an emergency, and the pros must be weighed against the long-term cons, such as in the case of investments.

For most other instances, you can consider a trusted and licensed moneylender to help you instead, so that you don’t need to dip into your emergency funds while still having access to additional cash.

When you apply for a quick cash loan in Singapore with Cash Direct, we can make an assessment and provide initial approval within minutes. With our generous eligibility criteria, we can also approve loans for people with low credit scores who have had loan requests rejected by their banks, as long as they meet our employment and document verification criteria.

If you would rather hang on to your emergency funds but need quick cash, talk to us about getting a cash loan in Singapore today.


The information provided on our website is for educational and informational purposes only and is not intended to be a substitute for legal or financial advice. While we try to ensure that information on this website is accurate, we do not warrant that the information will be free from error. We shall not be liable for any loss or damage that may arise from the use of this website.

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