- 16/4/2025

Cash payment or a loan?

2 min

Warning: borrowing money also costs money.

Paying in cash

Pros and cons of paying in cash

Advantages

A cash payment is a one-off transaction. It is simple and easy, and you do not need to take any special steps. The purchased goods are immediately yours. You have no repayment obligation to a financial institution, and you pay no interest or arrangement fees. Paying in cash is more common for smaller purchases, whereas credit is often used for larger purchases, such as a car or a house.

Disadvantages

If you pay in cash, the amount is debited directly from your bank account. You must therefore have enough funds available to cover the purchase. If you are planning to buy a more expensive item, such as a car or a house, you will need to free up a large sum of money, which is not always feasible. In that case, taking out credit is often preferred.

Financing – Reasons for borrowing

Keeping a cash reserve can always be useful

As mentioned earlier, it is advisable to have sufficient liquid assets available as a financial buffer for unforeseen circumstances or as a reserve for your dreams, projects and needs – or for your retirement later.

Are you planning to buy a house in a few years? Then keep in mind that, according to the guidelines of the National Bank, you may also have to contribute personally to the purchase. And don't forget about the registration fees and notary costs.

Building up savings takes time

Being able to set money aside depends primarily on your income and expenses, but it also requires discipline. Setting a clear goal can help you stay motivated, as saving is a long-term effort. These savings can then be used to fund some of your projects.
It may be useful to discuss your options with your financial advisor to determine the best savings strategy for you. If you are considering a major purchase, it is also worth consulting your bank advisor to explore the most advantageous solutions for you: paying in cash, borrowing, a combination of both, or partially using your savings.

The five golden rules of credit - How we make our decisions

Always a thorough financial analysis

A responsible bank must assess your situation carefully and should only grant you credit if it is financially viable. That is why your bank performs a detailed financial check every time you apply for a loan. A loan can only be granted if you have sufficient financial capacity. Why? Because a responsible bank must protect you and your family from financial difficulties and excessive debt.

The five golden rules of credit for responsible lending

If you are considering a loan, it is better that you get one under the right conditions for you and that you remain within a certain comfort zone during the repayment period. To help you, we share 5 golden rules that you need to keep in mind before borrowing money.

1. Choose a loan that matches your means and your needs
Borrowing more than you can afford is never advisable. To prevent this, your bank will assess your creditworthiness based on the correct and accurate information you provide, as well as  officially recognised sources.

2. Consider long-term manageable monthly repayments
It's simple: the faster you repay a loan, the less interest you pay. However, consider the bigger picture. Today, you may be comfortable with high monthly repayments, but what if your expenses increase in the future? If other projects arise in the short, medium or long term, will you still be able to afford these repayments? Avoid financial strain by carefully evaluating your repayment plan.

3. Maintain a reserve for unforeseen circumstances
It is always advisable to have some money set aside to be able to deal with unforeseen circumstances. This reserve provides peace of mind, knowing that if unexpected expenses arise, you have a financial cushion to rely on.

4. Check whether you have alternatives
The first alternative to borrowing is not making the purchase at all. You may decide that you do not really need the item. Alternatively, you could postpone your purchase while saving up the necessary amount, either in full or in part. Other financial options also exist: 
- Peer-to-peer lending platforms such as Mozzeno, which allow private individuals to lend money indirectly.
- Crowdfunding, which enables you to raise funds from a wider audience to finance your project.

5. Manage your credit(s) responsibly
A prudent and responsible borrower prioritises their family’s financial well-being. Act thoughtfully, weigh the pros and cons, and avoid unnecessary financial risks.