Getting a Personal Loan For Investment

[Mika]

The best use of loan money is to use it to buy assets or invest. You can get a business loan to run your business, a house loan to buy and construct a house, a car loan, etc. However, most banks do not have this loan type where you can write “to invest in stock market” or “to invest in mutual funds” as the purpose of the loan. Therefore, you will have to apply for a personal loan and use it to invest.

However, the question is whether it is safe to use your loan money to invest, in other words, do you get a better return from your investment compared to what you pay for the loan repayment? Is it wise to invest in something risky like the stock market through a bank loan? Stocks do not start giving returns immediately. How will you pay your loan installments until the stocks start giving dividends?

You should get a loan for investment only when you are sure that the return is higher.

 

[Jasmine]

The primary purpose of getting a loan is to invest or buy assets. For example, you get a loan and use the money to buy a house or land, or invest in the real estate or purchase equity. You start earning dividends on your stocks or return on your investment in the property or equity and use that money for loan repayment. Technically, you will be earning more on your investment compared to the interest you will be paying to the bank. A lot of time this calculation fails and people end up being broke. Let's say you borrowed money at the interest rate of 8 percent to invest in the stock market about a year ago. Let's say you are earning 10 percent return from your investment. Recently, banks have hiked interest rate and the stock market has fallen. Now, you are paying more money for loan repayment than earning from stocks.