The Blues boss believes his club are still years away from being able to rely solely on his own players.
Temporary additions have played a big role this season, with Gavin Bazunu, Hayden Carter and George Hirst all making significant contributions.
The approach has also attracted some criticism at developing players for other sides instead of talent already at Fratton Park.
Cowley feels the loan market is currently important to Pompey to keeping the level of talent up among his options.
He said: ‘When you’re in the lower league most clubs tend to use the loan system.
‘The reason we use the loan market is because the players who are available to you on loan are significantly better than the ones you can sign permanently.
‘They are significantly better than the ones we can afford.
‘If I sign players on loan I want ones who make the team significantly better.
‘It doesn’t always happen, but then it works for you, it works for the parent club and it works for the player.
‘There’s nothing worse than having a loan player who’s a bit-part player, because they can quite quickly lose their way - certainly psychologically.’
Cowley admitted the ideal scenario for any club would be to not rely on bringing in temporary additions at all.
But he feels Pompey are not currently in a position - or close to being able to say they don’t need loans.
The 43-year-old has used his quota of five loan additions this season - the maximum number allowed to be named in a matchday squad.
Cowley feels it’s a realistic target to look to drop that number to three in the shorter term.
He added: ‘You’d like to get to a point where we don’t need to use the loan system, but I think we’re quite a number of years from that.
‘If we can get to a point where we get say three loans then we wouldn’t be quite so reliant on it, but that takes time.
‘Wycombe have not signed many and gone with their group, so Gareth Ainsworth is one (who doesn’t rely on loans).
‘I guess being in the Championship helped them and Gareth was able to keep hold of his group.’