Skip to content
Learn About Personal Loans

Using Short-Term Borrowing and Long-Term Saving in Your Personal Finance Strategy

Saving money while paying for life’s big and small expenses can be a challenge. The good news is that it’s not impossible. For example, everyday budgeting can help you build your savings. Because there are different ways to borrow money, you may find that a short-term loan product can even help you reach your long-term financial goals.

Since you’re also trying to keep your debt manageable, you’re probably thinking, “That doesn’t make sense. More debt can mean more savings?” We get the apparent contradiction, so we’re here to lay it all out for you. Think of it this way:

Many large purchases can be too expensive for you to afford on your own, even if they’re unavoidable. For example, waiting to buy a house until you’ve saved enough to pay in cash may not be practical. You risk tying up your money in this one savings goal at the expense of your other goals. Or your kitchen appliances need replacing, you can’t pay cash, and don’t want to run up a big balance on your higher-interest credit card. This is when a short-term loan can be a smart option. 

Short-term borrowing helps you quickly access cash to pay for necessary purchases or emergency expenses. When you take out a short-term loan, you may also find it easier to save for long-term objectives. Instead of saving for one goal at a time, you can pay off a short-term loan while also saving for things like retirement.

First, you need to define your short- and long-term financial goals.

What are short-term financial goals?

Short-term financial goals are typically related to everyday living or immediate needs. These might include repairs to your home, a vacation you’d like to plan, or being able to comfortably pay for regular expenses like rent, mortgage, cell phone, streaming services, etc.

Examples of concrete plans could be putting $50 into your savings each month, paying cash for purchases under $20, or shaving $75 off your monthly household expenses by sticking to a budget.

What are long-term financial goals?

Long-term financial goals include things you don’t plan to spend money on right now, but want to be able to do in a defined period of time. This might be a big goal, like being able to pay a portion of your child’s college tuition, pay off your mortgage, or retire with a certain level of savings.

Short-term financial goalsLong-term financial goals
Rent, insurance, payments toward student loansPaying off a mortgage by age 65
Credit card paymentsStarting a business
Build emergency fundCollege tuition
Minor home repairsRetire at 67
Reduce monthly expenses 

How can I use short-term borrowing to balance my financial goals?

Borrowing in order to save may feel contradictory. And, yet, life happens and it could feel like a larger unexpected expense will undo your savings progress.

For example, if you have a sudden car repair bill, you might dip into your bank account to cover it, but that could set your long-term savings goals back. Or, if you don’t have savings, you could rack up credit card debt, which could interfere with short-term debt management goals. And if you can’t get your car fixed and drive to work, it’s harder to save. Fixing the car may be an immediate need, but it feeds your long-term plan.

In this example, a personal loan might help you cover your sudden unanticipated expense without sacrificing your savings or your credit card balance. With a personal loan, you get fixed rate, fixed term funding with a regular set monthly payment. This allows you to budget for building your nest egg, buying a car, or saving for retirement.

Why borrow instead of save?

Taking out a loan may not be the first thing you think about when it comes to reaching long-term savings goals. But there are good reasons to consider it. For example, if you waited until you had enough saved to make every large purchase, you’d not only wait a long time to access some of life’s basics, but you’ll miss out on fun and leisure.

Also, tapping your savings for an unexpected or particularly large expense, may create additional financial challenges, or at least obstacles to your longer term financial goals. For instance, when you withdraw from your savings and lower the account balance, you’ll earn less in interest.

Short-term borrowing with a tool like a personal loan can help you afford big expenses, or a dream vacation, while keeping your savings on track.  Because a personal loan is unsecured, you can borrow anywhere from $2,500 to $35,000 without putting up collateral (like your home). You’ll know exactly how much you’ll pay each month and for how many months, so you can circle a day on the calendar when you’ll have the loan paid off. They can be flexible and customizable. So you can build the repayment into your budget while also keeping your savings in there, too.

You can use a personal loan for a variety of reasons. Some people borrow to help pay for major life milestones, like a wedding or a special vacation. Others use personal loans to help pay for unexpected medical bills or home improvements.

Achieve your long-term goals with a short-term loan

When you simultaneously save and borrow the right way, you can pave the way for long-term financial stability. Life’s necessities, pleasures, and unexpected events can make saving harder to do, but there are ways to keep your long-term savings goals on track.  

Not all short-term loans are alike. Neither are lenders. Some lenders like Discover Personal Loans offer borrowers flexible loan amounts ranging from $2,000 to $35,000. Repayment terms can range from 3 to 7 years and offer competitive interest rates.

If you think a personal loan could be right for you, start by considering how much you need to borrow and what kind of repayment you can afford. Our Personal Loan Calculator  can help you do that math; you plug in the amount you need, the length of time in which you’d like to pay it off, and your credit score. We’ll show you an estimated monthly payment based on what your APR might be. From there, you can play with the loan term. A shorter loan term typically means a higher monthly payment; a longer loan term would be a lower monthly payment. You can take these ballpark options to see what fits your budget.

Go ahead and try it — there’s no commitment and no effect on your credit. And you can learn just what the right mix of borrowing and saving might be for you to enjoy today while you prepare for tomorrow.Estimate Monthly Payments