Taking care of your financial life, making investments to have an emergency reserve, and not worrying about money in the future is part of many people’s goals. But many people find a barrier to start: to invest; it is necessary to already have an organized financial life and have disposable income for investment. Therefore, the question arises: is it worth taking out a loan to invest?
As with most finance-related questions, the answer is: it depends. You have to be careful and careful, as investments involve risks. Therefore, it is necessary to evaluate the types of investments available, as well as the types of loans, to discover the best option for your reality.
In today’s text, we will address each of these aspects and help you to have the criteria to make the best decision. So, grab your notebook and write down all the important points to start your planning. Good reading!
Types of investments available
Investing in fixed income is the safest path for those starting out. This type of investment has guaranteed returns, and it is often possible to start small. However, their return is usually not that high. Therefore, it may not pay off to ask for a Principal loan to make this type of application.
Check out what were the rates of return of the main fixed-income investments.
Investing in variable income can bring greater gains, but the risks are also higher. Its results are unpredictable and may fluctuate according to the country’s economic situation. Check out the types of applications considered as variable income:
- Shares on the stock exchange;
- Multimarket funds;
- Real Estate Investment Funds (FIIs);
- ETF (Index Funds);
- Commodities (such as oil and gold);
- COE (Structured Operations Certificate).
To succeed in these applications, a lot of study and knowledge of the financial market is necessary.
Main types of loans available
This is one of the most popular modalities on the market, as several financial institutions offer this type of credit, and it is easy to contract. Each institution has its own rules and interest rates, and it is usually not necessary to be an account holder with the institution to obtain this. Personal loan interest varies between 1.10% and 23.33% per month in September 2021.
In this modality, interest is usually reduced, as the installments are deducted directly from the INSS benefit or from the applicant’s payroll.
Loan with asset guarantee
This modality offers even better conditions. It works like this: the consumer offers a good, which can be a property or a vehicle, for example, as a payment guarantee, and the financial institution reduces fees because it is sure that the amount borrowed will be paid. At CashMe, for example, you can find interest rates for the secured loan at 0.94%.
Is it worth taking out a loan to invest?
It is necessary to take into account some aspects to make the best decision when considering taking out a loan to invest:
Loan interest rate
Loan interest rates vary widely. Only in the examples that we have brought in this text is it possible to find rates below 1% and above 23%. Therefore, it is necessary to assess whether the profitability of your investment will be sufficient to cover the interest rate on the loan you borrow.
Total Effective Cost (CET) of the loan
Fees and taxes are added to the interest rate to form the loan’s CET. The longer your payment term, the longer the CET. Therefore, try to get to know the CET before making your decision.
Financial market knowledge
To make an application safer, it is necessary to study the financial market to know the best assets for your case. The first step is to know your investor profile and find out how to build a diversified portfolio with investments in fixed income and equity to protect your finances.
Return on investment
It is also necessary to take into account the risk of the investment, which includes two main factors: liquidity or the time needed to have a certain return, and market risk, since the value of shares or property, for example, can fall.
Those who invest in the stock market, for example, run the risk of redeeming a lower value than the one invested. That is, there is a great risk of having a loss and not being able to pay the loan amount.
Investment redemption period
In addition, it is necessary to evaluate the terms since if the investment does not have daily liquidity, you will only have the money to pay the loan installments when you redeem it.
Investments involve risks. Therefore, it is necessary to evaluate several factors when it comes to taking out a loan to invest, such as loan interest rates, return on investment, redemption period, and several other factors.
If you don’t have money saved to make an investment, the ideal thing is that you get organized first, paying off your debts and creating an emergency reserve at the same time as you study the market and plan future investments that are suitable for your profile. Investor.
Whether to pay off your debts or to start making investments, at CashMe, you will find loans with the best conditions: in addition to interest below 1%, you still have 12 months to pay the first installment and up to 240 months to pay, in addition to making all completely online, without having to leave the house. Make your loan simulation right now!
For you, is it worth taking out a loan to invest? Leave your opinion in the comments!