zyberianwarrior
|
NEVER EVER USE BORROWED MONEY TO INVEST! |
|
george 2
|
if this is a homework question then yes. if otherwise then no because taxes, loan fees, etc will more then eat up any profits you may make getting the 3 percent. |
|
Rod O
 |
Is the 10% taxed and the 7% not deductable? If yes, then you lose to the taxman if your tax rate is above 30% like most of us... |
|
Nancy Kay
 |
Is the 10% guaranteed or risky? Is that a 10% fast return, or over time? 7% per annum (yearly) adds up, while the 10% return may be the net over a long period of time and you will have paid more interest than earned. Then even if a fast 10% return, you will have to pay capital gains on the 10% earnings less the 7% cost of investment capital (if the interest was deductable) and that will further undercut your profits...starting to sound not as simple as you'd thought, eh? |
|
angryman1n
 |
NO!!!! That means you are only netting 3%. Most banks will offer that in either savings or money market accounts.
Plus, you are not guaranteed that 10%. What happens if you lose money? Then you are out the 7% AND your losses.
Never borrow money to invest. Save the money up first. Pros recommend having a savings equal to at least 3 months of your gross income ($3000/month means you should have $9000 waiting just-in-case).
American's are not saving nearly enough. We are heading to economic ruin if it continues. |
|
INACTIVE
|
Do you have another $150,000 available to cover the loan??? There are many variables to your question and as mentioned before, it's a matter of your risk tolerance and taxes and a number of other questions that need to be answered. If worrying about that money is going to keep you up at night, NO... don't even think about it. You'll be paying alot more in medical bills from sleepless nights and stress. |
|
david
|
depends on how much risk is and how much that will pull down your credit.if that pull down your credit too much,you will have less chance to borrow other money to deal with some possible urgent case. |
|
gatzap
|
Along with the issues of safe returns and taxes don't forget to figure in if payments are due on the loan. You would have to keep enough of the loan proceeds liquid to make those payments. |
|
Dethruhate
|
Depends entirely on the risk involved with the 10% return.
If there is no risk involved with the 10% reinvestment return, then go ahead (so long as there aren't any additional costs incurred in collecting) Taking the spread between borrowing and lending rates is exactly how banks make profit. |
|
equityhawk
|
I think you are referring to borrowing on margin to invest in a an extremely conservative play, like a partnership or unit trust. The concept is sound, except that the numbers are out of line. Borrowing to invest in stocks or bonds can be successfully incorporated into an investment strategy, but it should be short term. The most compelling and sensible reason to borrow against a margin account is that the return on investment will be much greater than the cost of the loan and it is a short-term opportunity. If the investment does not return 2 to 3 times the loan rate, don't get into it. If you have a well balanced portfolio, purchase a stock on margin with the potential to grow 20% in 12 months or less. Monsanto (NYSE: MON) is a great example. Cash out when the stock hits its target and pay off the loan. The sooner the better. You will be the richer for it.
Hawk |
|
Joe J
|
sure where are you finding this 10% investment? Sounds too good. |
|
madmilker
|
well.........question with question.....
Is it time for all fools to die? |
|
xeno277
|
Yeah, go for it!! Even if you eke out 9%, you still come out ahead and that 150,000 makes your life so much more plentiful. But pay the loan off when you get ahead and keep the rest, don't start to gamble.
What gives you a lock at 10%? |
|
Frank Castle
 |
Yes. |
|
| |
|
Homepage 
Financial
Forum 
Investing 
No Spam
Adult 
Gambling
Unfinished
Deception
Plagiarism
Not English
