In fact, loans are often perceived as a less good thing, which only costs money. And basically this is of course also correct. It is better not to have a loan because it involves a lesser risk to your finances as well as it costs money to borrow and it is better not to pay out money. But a loan is not necessarily bad and sometimes a loan is a really good alternative.
What is good about borrowing basically is that it allows us to do and buy things that we would otherwise never have managed on our own. For example, as with the mortgage. Ordinary people would never have been able to afford to buy a home if you had to put all the money in cash. That would have been unreasonable.
But if you ignore these obvious good things with loans, there are also a few other ways to look at it. You can save money thanks to loans, but only if you do the right thing and use the right loan for the right thing. We will go through this below.
Collect loans and save money each month
In fact, if you have many expensive smaller loans to pay off, you can actually save quite a lot of money by bundling them all into a single large loan. Collecting loans, also known as debt financing, has become increasingly popular. The point is that you can find a lender who can give you a large loan with lower interest rates and use that loan to pay off old more expensive small loans, which eat up your money every month through high interest rates.
For those of you who have many expensive small loans to pay off, it might be worth gold to switch to a collateral loan instead. You can cut your interest costs per month substantially by making the new loan a significantly lower interest rate than the old smaller loans that you settle. However, you must make sure that you only use the new loan to pay off the old expensive loans.
It also facilitates your financial life. You do not have to keep track of several different invoices and interest rates. A lower monthly cost gives you either the opportunity to sort out a bad economy (for example, if you go back every month) or room to save more money in a stronger economy with larger margins.
If you are in the classic debt trap, this can be an excellent solution if you can only find a lender who is ready to give you a large loan with a reasonable interest rate. Avoid getting into the Kronofogden register, stop the payment notes and debt collection and arrange your finances with the help of debt financing.
To get help with collecting loans, you can contact your bank or investigate other banks / lenders offering this type of loan. Even if you have a small loan from another lender, you can turn to your own bank for advice and guidance on debt financing.
Invest with borrowed money?
This is always a questionable thing as it introduces an extra level of risk in your savings / investment. If you invest money, there is always a risk involved, for example, in equities and funds. They can lose value. If you have invested borrowed money then it can become more tangible if you go back, since you have a cost for that money with your loan.
You can of course invest in more secure investments or save on savings account, etc. but the risk is that the return for this is far too low. You will not make any profit in this way, as there is a great risk that the interest rate on the loan is clearly higher than the savings rate.
Taking a loan to invest the money is thus an opportunity but also a risk that may be questionable. It is very much about what interest rate you can get and how confident you feel about your investments. Taking too big risks when investing is obviously not good, because if you lose the money you have additional problems.
Take loan to invest
In this situation it can be good to see if you can do something with your mortgage. It is a low interest rate loan, which may be worth using in this context. If you assume that you have borrowed USD 100,000 that you invest in shares or funds, your return per year must be higher than the interest rate on the loan.
For example, anyone investing in mutual funds can expect an average return of around 7-8 per cent per year, and in order for it to pay off to invest this money, you must therefore have an interest rate lower than that. A private loan is thus more doubtful given that the interest rate can be at 6 percent without problems and many times even clearly higher. So you can go back, plus the risk you take.
Here, the mortgage loan does its thing by having low interest rates. Today, the interest rate on mortgages is around 1.5 per cent on average, so there are good margins up to the return on funds. Anyone who is good at shares can also return a good bit more than that, even though the risk, as I said, is always there. Then you should also calculate that profits should be taxed and that a loan has interest deductions, which can affect the calculation somewhat.