Using Loans for Short- and Long-Term Financial Goals

It might seem contradictory to take on more debt to reach your savings goals but think of it this way: Some large purchases may be too big to fit into your everyday budget. For example, if your kitchen appliances need to be replaced, you might not want to run up a big balance on your higher-interest credit card. There may be a lower-interest tool that allows you to access cash quickly to pay for those larger necessities or emergency expenses. This is when a personal loan might be a good option.

Taking out a personal loan may make it easier to save for long-term financial goals. Instead of saving for one goal at a time, you could pay off a higher-rate loan while also saving for things like retirement at the same time. For example, if you wait to buy a house until you save enough for a down payment, you risk tying up your money for this one goal while ignoring other plans.

The sections below break down common short-term borrowing options and long-term financial goals. Finding the right balance between them could help you move forward with confidence.

What are short-term financial goals?

Short-term financial goals are typically related to everyday living or immediate needs. These might include home repairs or a vacation. They might also include regular expenses like rent, utilities, cell phone bills, or streaming services. Each of these expenses could be part of a well-planned budget.

What are long-term financial goals?

Long-term financial goals typically include things you don’t pay for right away, but you know you’ll have to pay for within a set period of time. This could include major goals like covering a child’s college tuition, paying off your mortgage, or retiring with a certain amount of savings.

Examples of short-term and long-term financial goals

Short-term financial goals and needs	Long-term financial goals
Rent or insurance	Paying off a mortgage by age 65
Credit card payments	Starting a business
Emergency fund	Saving for a child’s college tuition
Minor home repairs	Retiring at age 67
Monthly expenses	Paying off a student loan

How can you use short-term borrowing to achieve long-term financial goals?

Borrowing to save money may seem contradictory. But unexpected events do happen. A sudden, large expense may have the potential to undo your savings progress.

What happens if you get a surprise car repair bill? You might dip into your savings, but that may upset your long-term savings goals. Or, if you don’t have savings, you might rack up credit card debt. That could hinder your short-term debt management goals. And if you don’t get your car fixed and miss work, it may be harder to save. Fixing your car might be an immediate concern, but it also affects your long-term plan.

These could all be reasons to get a personal loan. A personal loan’s purpose in this situation is to help you cover the unexpected expense without depleting your savings, adding to your credit card balance, or making planning feel impossible. With a personal loan, you get a fixed rate with one set regular monthly payment you can budget for. That could help you keep your short and long-term financial goals on track.

Should you borrow now or wait and save?

Taking out a loan may not be an obvious choice as you work to reach your long-term savings goals. But there are strong reasons to consider it.

Short-term borrowing options—like a personal loan—may help you cover major expenses while keeping your finances on track. A personal loan is unsecured, meaning you don’t need to put up collateral (like your car or home) to receive the loan.

With a Discover^®Personal Loan, you can borrow between $2,500 and $40,000 with flexible repayment terms which allow you to choose how long you’d like to repay your loan—from 36 up to 84 months. You’ll know exactly how much you’ll pay each month, and for how many months. For example, if you get approved for a $15,000 loan at 11.99% APR for a term of 72 months, you’ll pay just $293 per month. You can also use a personal loan for a variety of reasons. Some people borrow money to help pay for major events in their lives, like a wedding or dream vacation. Others use personal loans for medical expenses or home improvements.

When is borrowing smarter than drawing from savings?

Taking out a personal loan may be a better option than drawing from savings if your situation checks off the following boxes:

Taking from savings will deplete your emergency fund. It’s typically recommended that you keep 3–6 months of expenses in your emergency fund. Borrowing could help retain this safety net.
Your loan interest rate will be lower than your savings return rate. If you’re able to qualify for a low interest rate, it may be better than missing out on potential return from your savings account.
Your loan repayment time is short compared to your long-term goals. If your long-term financial goals are far in the future, like retirement, borrowing with a short repayment plan means you’re prioritizing the “now”, but you will still be working toward that goal.

Think a personal loan may be right for you? Start by figuring out how much you need to borrow and what kind of repayment plan you can afford. Our personal loan calculator can help you do the math.

You’ll enter the amount you need, your credit score, and the length of time you might need to pay the loan off. After you get an estimated monthly payment, you can adjust the loan repayment term to find a payment that fits your budget. With Discover, you can see what your loan rate and set regular payment could be before you apply with no impact to your credit score. Plus, the application process is easy and fast.

Achieve your long-term goals with a personal loan

Saving and borrowing the right way might help you achieve your long-term financial goals. Life’s necessities, everyday pleasures, and unexpected events may make it harder to save—but short-term borrowing options could help keep your long-term savings goals on track.

Using Personal Loans to Achieve Long-Term Financial Goals

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