Is it Wise to Apply for a Loan to Invest?
September 26, 2019
Apart from paying the bills, you should consider paying yourself first whenever your paycheck arrives. That means setting money aside as your savings first before allocating what is left for your necessities, bill payments, or travel and leisure. However, the traditional form of saving up on your piggy bank will no longer make you financially stable. You need a solid investment to start building your financial foundation. The question now is, how can you start investing if you do not have the cash to invest in the first place? The simple answer is what is known as “invest into a loan”. This is basically investing the proceeds of a successful loan application.
Banks and Loans
There are now several types of consumer loans and one of these is a personal loan. The advancements in modern technology already permit consumers to apply for a personal loan through the web or mobile devices, without having to personally visit a bank. Most of the banks leverage on this technological advancement for the convenience of their consumers. Such is Instabank Sweden, which offers personal loans intended to be utilized for a wide variety of purposes, depending on the borrower. It can be for a home renovation, school, and medical assistance, credit consolidation, or best of all, for investment purposes. Most banks already provide online loan calculators to make the payment terms, loan duration and interest rates transparent to the borrower.
Investing a Personal Loan
Applying for a loan and investing the proceeds afterward is a wise decision so long as the following factors are considered.
- Interest Rate. Both the loan and the investment have interest rates. If the rate of return of your investment is greater than the loan rate, then there is a greater chance for you to make your money grow.
- Investment Scheme. In line with the interest rate, study the investment scheme you are considering because different schemes entail different risks. As a general rule of thumb in investing, particularly in the stock market, big gains come with high risk. It also follows suit that smaller gains come with a lower risk. This means that highly volatile stocks can make you win some and lose some, while more mature stocks can generate a consistent but a minimum investment return. Assess your risk appetite before plunging in with the investment.
Payment Terms. In investing, your goal should be to generate returns on a regular and periodic basis. But it is also true that time is needed in making your money grow. Hence, it is necessary to have an alternative means to pay back the loan while waiting for your investment to realize substantial gains.
In conclusion, consider all the factors above, including your current state of debt. Apart from these factors, take into account the various processing fees involved in both the loan application and the investment deal. Better yet, consult a financial adviser. All these determine whether you have a great chance of making your money grow and building a solid foundation of wealth.