Our ancestors have timely advised us against lending or borrowing money. However present-day banking has offered us a valuable lesson that loans have their own advantages to offer too. In this case, personal loan has some of its own upsides.
A personal loan can be utilised for multiple end uses which also includes investments. Yes, many may find this as an astonishing thought, but it is true. You can avail a Loan for using it to invest in various places. We shall discuss how further how a loan can be used for investing in mutual funds.
Personal Loan –
Unlike other kinds of loans, Personal loan comes with restriction-free end use. For example a car loan, or a home loan has a specific designated purpose. Generally, interest rates on a loan is higher than other forms of loan. Below are some of the purposes for which you can use the loan –
- Debt consolidation to make repayment easy
- Repayment of credit card dues
- Renovation of home
- Planning a grand wedding
- Deal with urgent medical expenses
- Expenses of a planned vacation
- To invest in stock market
Key attributes of a Personal Loan –
A loan can be acquired from different sources like banks, NBFC’s, online lenders, credit unions etc. A personal loan generally does not need any collateral to be pledged for availing it. A secured form of Loan is also available for which you need to pledge some kind of collateral.
As there is lower risk involved in secure financing, the interest rates of this kind of loan is generally lower than unsecured personal loan. Unsecured funds have higher rate of interest because there is no collateral involved to be used to compensate in case of default.
Instant personal loan apps –
Online instant loan apps are mobile applications designed to address all your needs related to availing instant funds. These apps have digital process of applying for a personal loan, check the loan application status, checking the total cost of loan on personal EMI calculator which is built in within the apps.
The instant loan apps have simplified the procedure for availing a loan. They also have multiple advantages to offer to their users. They are as follows –
1. Loan apps are a very convenient medium to avail instant funds as they are always available for you any time, anywhere.
2. You can monitor your loan application and check its status or get your queries resolved 24×7, for all year round, irrespective of holidays.
3. Digital process is quick and timesaving and also eliminates physical paperwork. This helps speed up the approval.
4. Quick processing helps get your quick approval and instant disbursal of funds in your account.
5. Although customer service is an option, but your queries and issues can be easily resolved on the app itself via chatbots or virtual assistants present on the apps.
Does it make sense to avail a Personal Loan for making investments?
When someone takes a loan for investing in the stock market it is known as the action of ‘gearing’ or ‘leveraging’. But, if this is an advantageous move or not, is a debatable topic. We shall see the pros and cons of availing a Loan for investments below –
The prime argument in favour of availing loan for investments is that the revenue generated through stocks help cover the entire expense of the loan taken and yet, leave you in a considerable profit.
If at an instance you feel the urgent need of investing in stocks and find yourself in deficit of funds, you can quickly avail funds through instant loan apps and get the amount disbursed in your account.
The biggest con can be that if your stocks don’t pay off well in return, and your profits are not as many as expected, you might incur a loss and still have left with EMIs of the Personal Loan to repay. In this case, it is a double loss.
How about investing in mutual funds?
Availing a Loan to invest in mutual funds makes sense only if your returns on them exceed the percentage of interest that you will have to pay for your loan. Hence, this is a judgement call which must be taken only after considering all facets that revolve around availing a loan for investment.