How does a personal loan affect my savings account balance?

A personal loan can impact your savings account balance in several ways, both positive and negative, depending on how you manage your finances. If you use a personal loan to cover planned expenses or emergencies, you avoid dipping into your savings or breaking fixed deposits. This approach helps preserve your long-term financial security and keeps your investments growing which is important for future goals like retirement or your child’s education.

On the flip side, you’ll need to budget for monthly EMIs, which are usually deducted from your savings or salary account. If you don’t plan carefully, these regular outflows can reduce your available balance and make it harder to save each month. Rising interest rates in 2025 have made EMIs larger for many borrowers, so it’s even more important to track your spending as well as adjust your budget accordingly.

To manage your savings effectively while repaying a personal loan consider these steps:

• Include the EMI in your monthly budget as well as adjust discretionary spending.
• Set up alerts or reminders to make sure that you never miss a payment.
• Keep an eye on your bank balance regularly to avoid penalties or bounced EMIs.
• Use the loan for productive purposes like consolidating high interest debt which can free up more money for savings in the long run.

Some borrowers also use personal loans to build or repair their credit profile which can help them access better financial products in the future. Responsible management ensures your savings remain intact and your credit score stays healthy, supporting your overall financial wellbeing.