Personal Loans for New Parents: When Do They Make Sense?

Parenthood is all about paradox—it fills your heart even as it drains your wallet. It’s not just the sweet lullabies you’ll need to master; it’s also the art of juggling costs. Last we checked, it can cost over $30,000 just to have your baby. And don’t even get us started on expenses during the growing up years or the sudden medical emergencies that can derail all your careful budget plans.

When life throws you an expensive curveball, personal loans might come to mind. These provide quick cash without requiring collateral—meaning you don’t have to pledge assets like a house or car. You can use the loan for a wide range of financial needs, which makes it perfect for the unexpected expenses that can come with the arrival of a new child.

But while personal loans can be a lifeline, they also add debt if mismanaged. Let’s look at when borrowing makes sense for new parents so that your decisions don’t just get you through the next month, but set you up for the years ahead.

Should new parents take a personal loan?

1. Costs of raising a child in Singapore
2. 6 scenarios where a personal loan makes sense for new parents 
3. 5 scenarios where a personal loan does not makes sense for new parents 
4. Should I take a loan as a new parent?
5. Conclusion

 

1. Wait, is raising a child in Singapore really that expensive?

Um, yes. According to our estimates for the cost of having a baby in Singapore, you could pay an eye-watering $30,000 and up just to get through pregnancy and the first month or so of your baby being born.

As your kid grows, education and healthcare expenses will continue to go up—think preschool and enrichment classes, vaccinations, routine check-ups, and possible unexpected medical issues. When you add it all up, the lifetime cost of raising a child from birth through to university can be almost $900,000!

 

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But let’s not get ahead of ourselves. If you’re reading this, you’re probably a new parent or parent-to-be, and you’re just trying to figure out how to survive the first year. We’re talking pregnancy and delivery costs, postpartum care, baby essentials, baby-proofing your home, childcare, and the like. Yup, those tiny tykes come with not-so-tiny price tags.

Financial tools like personal loans can certainly help ease your transition into parenthood. But is taking a personal loan as a new parent the right move? 

 

2. 6 scenarios where a personal loan makes sense for new parents 

1. Covering unexpected medical expenses

Medical complications during pregnancy or childbirth can really throw a wrench in your finances. Whether it’s an emergency C-section, neonatal care, or extended hospitalization, medical expenses take no time at all to spiral out of control. Even with insurance coverage, the out-of-pocket costs can be overwhelming.

That’s where personal loans can be a lifesaver. They give you quick access to cash, helping you manage your medical bills (and probably also helping your blood pressure). In challenging times, that kind of financial relief and breathing room also lets you concentrate on what truly matters—recovery and caring for your baby. 

2. Bridging income gaps or securing childcare services

After maternity and paternity leave periods end, not all parents have someone at home who can help them to take care of their baby while they return to the office. Childcare services are a solution, but have you seen the costs? According to Income, childcare in Singapore can cost between $720 to over $2,500 per month, depending on the provider. 

In the event the income you earn isn’t enough to comfortably afford childcare services on top of all the other baby expenses bleeding out your wallet, a personal loan can help. The cash you borrow can be used to pay for these services that will take care of your little one while you’re away at work. 

3. Managing short-term cash flow gaps

There is an alternative to sending your kid to childcare: one parent could also take unpaid leave to care for their baby. The disadvantage of this is that their income will take a hit—just as baby expenses skyrocket. Ouch. 

While the scenario above isn’t exactly ideal, the financial strain is only temporary. If you know your income will stabilise soon—like if you return to work after maternity leave or know you’ll be receiving a work bonus—a personal loan can help you to cover essential expenses now and pay them off gradually. No need to frantically scramble for cash or make drastic cuts in your budget.

4. Avoiding or managing high-interest debt

Thinking of putting baby expenses on your credit card? Think again. While credit cards seem like a quick fix, they come with interest rates usually around 27.9%, compared to personal loan rates that typically range from 3% to 10%. That’s a huge difference. Instead of accumulating expensive credit card debt, a personal loan offers a lower interest rate and a predictable repayment schedule.

For those who may already have credit card debt, you don’t want to be going into parenthood already in debt, do you? Here’s a better idea: consider consolidating your balances with a lower-interest personal loan. This can reduce your monthly repayments and curb some of that financial stress.

5. Avoiding draining emergency savings

We all know that having a baby means buying a lot of things—cribs, strollers, car seats, and baby-proofing supplies. While these are essential, they can quickly add up, eating into your savings and perhaps tempting you to dip into your emergency stash. 

But ideally, emergency funds should be reserved for unexpected crises like medical emergencies or job loss, not everyday baby expenses. A personal loan allows you to spread out big purchases over time while keeping your emergency savings intact in case of surprises like—touch wood!—medical emergencies.

6. For home expansion and baby-proofing

To welcome a baby, some families may need to move to a larger home, while others may need to renovate their current space to accommodate their growing family. Setting up a nursery, installing safety gates, or even upgrading to a bigger home are some of the most exciting parts of baby prep, but come with significant costs—and all at once too. Gulp.

A personal loan can come in as a practical way to finance these home improvements without delaying necessary upgrades. After all, creating a safe and comfortable environment for your newborn is essential—health and safety are priceless.

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ALSO READ: Personal Loan vs. Renovation Loan Comparison Guide: Which Is Better for Your Home Makeover?

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3. 5 scenarios where a personal loan does not make sense for new parents

While personal loans can be a financial lifesaver, they’re not always the right solution. After all, you’re still incurring debt, and that could lead to even greater financial stress in the future if you borrow irresponsibly. Here are 5 signs that taking a personal loan might not be the best choice for you.

1. Your expenses exceed your income in the long-term

If baby expenses are permanently higher than your earnings, a personal loan is just a band-aid solution that will only increase debt and fail to solve the underlying issue. Instead of borrowing money, look for ways to adjust your budget, cut unnecessary spending, or explore additional income sources to improve your financial stability.

2. Your emergency fund is your only safety net

If your emergency fund is empty, taking on debt could leave you even more financially vulnerable. Without savings to fall back on, any unexpected expense—like a medical emergency or job loss—could push you into a deeper financial hole. It’s best to build up an emergency stash for a solid financial cushion before considering a loan. In the meantime, look for other ways to reduce your spending or increase your supplementary income.

3. You’re unsure about repayments

If you’re uncertain about your ability to meet loan repayments by their due dates, you might want to reconsider taking a personal loan. Missed payments can incur penalties and significantly damage your credit score, making it harder for future you to borrow money, and adding a great deal of stress to you in the present. Not fun.

While a personal loan may offer immediate relief, you should avoid financial overcommitment. Always ensure you have a clear repayment plan before borrowing.

4. You have untapped savings

Before borrowing, consider whether you already have enough savings to cover expenses. If you have a financial buffer, it’s usually wiser to use it rather than take on unnecessary debt. After you’ve set aside your emergency fund, use your other savings—just be sure to spend wisely and conscientiously on baby purchases you really need. Now isn’t the time to buy your little one silk pajamas.

Personal loans should be reserved for essential, high-cost situations—such as medical emergencies—where borrowing provides a clear financial advantage. For planned expenses, tapping into savings ensures you’re not paying interest on funds you already have.

5. You already have existing debts

If you’re already juggling multiple loans or credit card debt, adding another repayment may strain your finances further. That’s no good—a personal loan should enhance financial stability, not compromise it. 

Instead of taking on new debt, you should focus on paying down existing obligations first. Consider debt consolidation or refinancing options before committing to an additional loan, ensuring you maintain financial stability rather than creating a bigger financial burden.

 

In summary, while personal loans are beneficial in many contexts, they require careful consideration. Ensure that borrowing is motivated by genuine necessity to avoid common debt traps and maintain their long-term financial well-being.

 

4. Should I take a loan as a new parent?

In the previous 2 sections, we talked about scenarios you should or should not take a personal loan. A lot of these scenarios involve minimizing debt and ensuring that really need an injection of cash to balance out your income inflows and outflows. Simply put, is the math mathing? Does a personal loan fit your current financial needs? 

To decide if you really need a personal loan and how much to borrow if you do, you need to review your current financial situation first. Here are 6 steps to get you started.

1. Review your income and expenses

Start by evaluating your financial situation. Calculate your total household income, including any supplementary earnings, and compare this against your regular expenses. The idea is to identify your disposable income and figure out your ability to take on monthly loan repayments without straining your budget. You want to be sure of your borrowing limits in order to prevent missed repayments, which will incur more debt and additional charges.

2. Adjust your spending habits

Adjust your spending habits by creating a detailed baby budget to accommodate new expenses. Identify areas where you can cut back, such as dining out or subscription services, to free up funds for baby essentials. Proactively altering your spending habits can significantly ease financial pressure and reduce the need for additional debt.

Consider a personal loan only if you cannot make ends meet after streamlining your budget. Remember, borrowing should be a last resort, not a first response.

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ALSO READ: 9 Free Budgeting Apps to Help You Manage Your Expenses (2025)

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3. Determine your debt-to-income ratio

Understanding your debt-to-income (DTI) ratio is a pivotal step in assessing financial stability. While there’s no magic number, a DTI ratio below 36% is generally considered healthy.

To calculate your DTI, divide your total monthly debt obligations by your gross monthly income. This figure provides insight into how much of your income is committed to debts and helps gauge your capacity to take on additional loans.

4. Establish an emergency fund

If you don’t already have one, start setting aside money right now. A robust emergency fund is essential (even if you didn’t have a baby).

Aim to stash away 3 to 6 months’ worth of living expenses that you will not immediately use on everyday expenses for your child. In other words, for expected baby expenses, you should only tap into your savings that are over and above your emergency fund. Your emergency fund is a last resort meant for unexpected costs like medical emergencies or job disruptions.

5. Make use of government support

With Singapore’s low birth rates, you can be assured the government wants us all to have kids. That’s why there are several government support options that can lighten your financial burdens as a new parent before you turn to a personal loan.

Programs like the Baby Bonus Scheme and childcare subsidies can be a huge help for new parents. The former actually comprises 2 components: a Cash Gift and the Child Development Account (CDA) top-up. For your first child, this is what your family will receive:

• Cash gift: $11,000
• CDA First Step Grant: $5,000
• CDA maximum government co-matching: $4,000

In total, you could get up to $20,000 from the government after your first child. Factor that when you’re doing your budgeting.

Other initiatives include childcare subsidies and tax relief (e.g. the Working Mother’s Child Relief), along with maternity and paternity leave benefits. Make use of platforms like Support GoWhere to access information and apply for the benefits you’re entitled to before you resort to a personal loan.

6. Review your financial goals

So, all things considered, you’ve figured out that you need some extra cash and taking a personal loan makes sense for you as a new parent. In this case, there’s one more thing you need to do before you explore personal loans and take one up: define your financial goals.

Identify how much you need to borrow, ensuring the loan serves a specific purpose, such as covering baby-related expenses for the initial months. Personal loans should be a strategic tool, not an excuse to overspend. For instance, if your goal is to manage childcare expenses for 1 year, stick to that amount. Avoid using the fact that you’re taking a personal loan as an excuse to borrow more and finally buy that branded bag. Trust us, in the long run, staying focused on your financial priorities ensures you don’t take on more debt than necessary, keeping your finances on track.

 

5. Conclusion

A personal loan should be a financial tool, not a burden. While it can provide relief during critical times, you should first assess your cash flow, adjust spending habits, and explore all financial options before borrowing.

Careful financial planning can help ensure your journey into parenthood is stress-free, allowing you to focus on your growing family instead of worrying about debt. Plan ahead, borrowing responsibly if you need to, you can enjoy this new chapter without unnecessary financial strain. All the best!

 

This article was first drafted with the help of AI and later reviewed and refined by the author.