Posted on March 15, 2016 by
It takes money to make money.There is a lot of truth to that old adage. The more money you have to invest, the more money you can expect to earn in return. The problem is, what if you don’t have much money to get started – does it make sense to borrow to invest?
Using a personal loan to invest is a controversial idea. It can certainly amplify the returns you would get from your own resources, but it also amps up the risk.On some level, investing with borrowed money is not as unusual as it might seem. Millions of Americans have both investments and loans at the same time. Most of them don’t borrow specifically to invest, but instead have car loans, mortgages, or student loans at the same time they are building their IRAs, 401ks, or taxable portfolios. Rather than paying down their loans faster, they are choosing to invest the money instead.
However, using a personal loan to invest takes this idea to another level. Unlike with a car loan, Lånapengar mortgage, or student loan, if you borrow specifically for investment capital, you won’t have anything else to show for it. The entire success or failure of the loan depends on how well your investments do. Before you undertake such a risky proposition, it is important that you know all the dynamics involved.
f your credit card balances and interest rates are over the moon, a personal loan can potentially help with debt consolidation. Here’s a scenario. Let’s say you had to max out your only credit card after your car’s engine blew up. Depending on how much you qualify to borrow, a personal loan can roll your credit card balance into your personal loan with a lower interest rate and lower monthly payment amount. Personal loan rates are cheaper than credit card cash advances or sms lån “quick cash” payday loans.Credit cards allow you to continuously spend within your credit line. In spite of making payments, your balance can increase if you continue to use your card. Credit cards may also carry variable interest rates that can change minimum payment amounts and increase interest owed on your credit card balance. Fixed-rate personal loans typically offer fixed interest rates with stable monthly payments and are paid off within a specified payment term. The Consumer Financial Protection Bureau cautions consumers to avoid running up more debt after consolidation; this can lead to owing more than you did before borrowing a personal loan.
Don’t borrow more than you can reasonably afford to repay: You aren’t going to quit eating for two weeks to make your personal loan payment. Before taking out a personal loan, be certain you can repay it.
Consider making more than minimum payments: Repaying your personal loan ahead of time can help improve your credit and your credibility with your lender; you may be able to borrow more for your next personal loan.
Why you need a personal loan: Once you qualify for a personal loan, you can use the cash for almost any purpose. While convenient, this flexibility can lead to trouble if you borrow for frivolous reasons and later cannot repay your loan. It’s best to limit your borrowing to specific financial needs or covering emergency expenses that have to be paid.
When you’re ready to apply for a personal loan, it’s important to shop and compare multiple loan quotes to find a personal loan that works for you and your circumstances.