2007-01-06 01:42:59 · 8 answers · asked by Anvil dale 1 in Business & Finance ➔ Investing
I know not everyone would agree with me, but I would say "NO", except in the extraordinary circumstance that you have a guaranteed return that is higher than the interest rate on the loan.
If there is any risk involved, the answer is "no". Although on average people are able to beat the odds by taking out loans and investing the money, you also need to think of your "marginal utility". That is the following principle:
If you have $2000, then it hurts you much more to lose $1000 than it helps you if you gain $1000.
Think of this in mind...even when there is only a small chance of losing your initial investment and going into debt, that situation would be so undesireable that even a small chance of that happening would more than balance out any possible gain you would get.
Investing should only be done with "extra" money...that is, savings that you can afford to lose. If you approach it with this attitude, in the end, you'll end up getting rich anyway, and you will have zero chance of ever ending up in debt. Don't have extra money to invest? Then considering finding ways to earn more money, or discipline yourself to spend less. You should be skeptical of any "get-rich" scheme that does not involve discipline and patience.
2007-01-06 12:06:23 · answer #1 · answered by cazort 6 · 0⤊ 0⤋
Yes, it's ok to loan for an investment. But it is very risky. You need to know if the person can pay you back. Usually, you would use their credit rating as a gauge, or take collateral as a promise to pay.
As a rule, loaning to family and friends is more risky than entering into an agreement with a third party. And no matter who you loan to, you should put everything in writing, including when and how they are going to pay you back.
2007-01-06 09:48:16 · answer #2 · answered by Herbal Guy 1 · 0⤊ 0⤋
The only time I would take a loan for an investment is for a real estate investement where you can be assured that the asset will appreciate over time. In my opinion, in almost every other case you are taking a foolish risk that will rarely work out.
2007-01-06 10:20:42 · answer #3 · answered by mark w 2 · 0⤊ 0⤋
It is called trading on margin. The interest rates on the loan tend to be very expensive. They can also force to liquidate if the investment vaule falls below a certain level. (a margin call)
2007-01-06 10:11:43 · answer #4 · answered by Ubiquity 2 · 0⤊ 0⤋
You have to compare it whether the loan interest will be higher than the returns of your investment.
2007-01-06 09:47:58 · answer #5 · answered by Dang 3 · 0⤊ 0⤋
Too many people borrowing money for investments is what led to the stock market crash in 1929, creating the Great Depression.
2007-01-06 09:52:20 · answer #6 · answered by Uther Aurelianus 6 · 0⤊ 0⤋
prosper.com is a website that lets you loan people money for a certain interest rate that is bid for. i am nervous to use the site but it's the only one i know of its kind. good luck
2007-01-06 17:15:58 · answer #7 · answered by jojo 3 · 0⤊ 0⤋
don't expect to get your money back
2007-01-06 09:50:14 · answer #8 · answered by Anonymous · 0⤊ 0⤋