20 Jan 2012

When should you invest in credit?

You know that getting a loan you will pay a lot better that you purchase. But thanks to the leverage provided, would it not a good idea to contract a loan to invest? By investing a larger amount, you multiply your winnings. Under what conditions contracting a credit to invest may prove to be a good idea? What are the tricks you need to know to take full advantage?

Finance an investment for which you do not have the funds

The first case in which a credit is worth to invest is when you do not in any case the amount required to make this investment. This may include the purchase of a property or buying a business for example. You need to take out a loan otherwise unable to become the owner. Your home or business owned by your bank until you has repaid your credit. If you do not pay, you took her. The total amount of your credit, the amount you will actually pay is much higher than the price you negotiated with its former owner.

But it is a good credit. Over time, your home or business should take the value and worth more than the total cost of your credit. Your credit is a forced savings: each month you had no choice but to pay your banker. This offering is perhaps not great, it remains to discuss and assess the length (in the case of your home, if you add all the additional costs or if you sell real estate in crisis). But in any case, you leave with a nest egg worth the money paid by the long term. Bad credit, as for the purchase of your car, you do pay a lot more property that will be worth much, for sure. In this case you lose lots of money and overpay your purchases.

An investment fund for which you have funds

You can have the amount needed to buy with your home or your business and still getting a loan. It's interesting if the percentage rate of credit less than the gains made ​​by placing the money you have. You lose money by financing your investment in cash . This is the case for example if you can borrow at 3% and your money invested earns you 5%. This is only valid if the investment is placed on which your money is secure. You are certain that your money will earn you more than the cost of your credit.

In the first case discussed above, that of an investment for which you did not have the money necessary to finance your car on credit. if you have the money to buy your car but invest this money will earn you more than the cost of a car loan, it is better to buy your car on credit (or at least to fund a portion).

Finance an investment credit to increase your earnings

We have seen the moment of classic cases; it is always good to remember. Here is a case of more complex editing to show you what can be achieved by investing with credit. The purpose of this arrangement is to increase the gains of your investment. The only requirement for this installation is to have a starting capital.

1. You place your starting capital of a fund, which will yield about 4% for sure, once the tax deducted.
2. You take out a loan with bullet repayment of the amount of your capital on the deposited funds. You guarantee your loan with your money and get a lower credit rate. The cost of credit as low as possible which ensures higher earnings.
3. With the borrowed money, you invest in REITs. The gain of this offering will be approximately 6% before tax. As the REIT investment is financed by a loan, you receive a tax deduction on your taxes that divides capital gains in half. If your credit rate is 3% and your tax rate on capital gains for REITs is 1% in total winnings will be 7% . Interesting is not it?

The calculation is deliberately simplified because the goal is just to show you the mechanism. With 100 of capital you invest 200 and above you get the best possible discounts to increase your earnings. In the example, you can ensure your loan with your money to lower your rate and you put your money on an investment that the gain will be taxed less because you have invested on credit.

The rules for investment credit

The different cases studied in this article, you can take at least two rules if you plan to invest on credit:

1. You should invest in credit if your gain is secured. We need your gains far outweigh the cost of credit.

2. It is even more interesting to invest in an investment credit for which you will benefit from tax cuts because of your credit.

What other advice would you give to someone who wants to invest in credit? Have you already done and for what type of investment? Did you know the methods set out to make more money when investing on credit? Do you know of others?

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