2007-07-03 16:30:37 · 7 answers · asked by Paul A 2 in Business & Finance ➔ Investing
It can be, but you have to be pretty sure that what you are going to invest in is going to make more money than the interest you are going to pay.
This happens in many industries. For instance, real estate investors borrow money to flip houses. They pay interest for six months, but are able to sell their investments for thousands of dollars of profit, if they know what they are doing (please note that many LOSE money doing this).
I am an importer/exporter, and sometimes I borrow money short term, because I know that I can invest in a truckload of soap and sell it for more in 30 days.
It has become very popular for lenders on Prosper.com to to borrow money from others on their good credit (Prime AA at perhaps 7-8%) then lend it to Subprime B/C/D borrowers at 14-20%.
So there are ways to do it. However, the main repeating theme is you need to be very sure that your investment has the profit potential to make your borrowing worth while.
2007-07-03 16:55:37 · answer #1 · answered by rlloydevans 4 · 1⤊ 0⤋
No, it would not be wise to get a loan to use to invest. First, you would need to know what interest rate you would be paying on the loan. Then decide what types of investments you would be putting the money in. Then figure out what the percent return on your investment would be. For this to be a wise decision you would need to know that you would be making more from the investment (after investment expenses) than you are paying in interest on the loan. And any investment that has a guaranteed rate of return higher than what you would be paying in interest is pretty much non-existent.
2007-07-04 13:14:19 · answer #2 · answered by lynn 2 · 0⤊ 0⤋
Absolutely not. If firms Citibank can't get more for the money they loan you, what makes you think you can do better? You're taking a hell of a chance if you go the route you're thinking and could end up with nothing and still need to pay back the debt.
2007-07-04 15:22:21 · answer #3 · answered by Steve B 2 · 0⤊ 0⤋
Not unless you can get a 1,000,000% guarentee that the money you make of the investment is going to cover the cost of the loan
2007-07-03 23:38:43 · answer #4 · answered by pccomp666 2 · 0⤊ 0⤋
Sure. I do it all the time. Just make sure that the return on the investment is higher than the loan interest rate. his is called a "spread".
2007-07-03 23:39:28 · answer #5 · answered by Ted 7 · 0⤊ 1⤋
Nope - because odds are your loan interest will always be higher than rate of return on your investment
2007-07-03 23:36:10 · answer #6 · answered by Mike Frisbee 6 · 0⤊ 0⤋
My answer to you is no it is not wise until you know for sure what you are getting yourself into and you are very confident that you will not lose the money you borrowed
2007-07-04 01:40:55 · answer #7 · answered by kevinjohnbrown 2 · 0⤊ 0⤋