Today, one would suggest you with different ways to borrow money. It has become an important source to build on your assets and investments. But if it goes wrong, it may lead to a nightmare.
Of course, taking loans can help to boost your investments & thereby returns. So, how is it actually done? Any borrowing can help you to put money into assets like land, financial instruments, gold, etc. which otherwise cannot be thought of.
According to an old study, the richest men built their own careers on debt/borrowed money. It basically about how intelligibly you invest money into profitable avenues with full conviction. Isn’t it?
So how do you start? Buying a fancy car as soon as it is out in the market? Or when the value depreciates?
Have you invested in a plot or a well-furnished house? Such decisions actually decide how judiciously do you spend your hard-earned money.
The fact of the matter is whether you’re borrowing for an asset or liability? The credit percentage is exponentially increasing compared to the last few years. This is insane!
5 Different Ways to Borrow Money
Taking money from a difficult source or putting money into unprofitable channels can be risky. So, better research well, compare & arrive at a conclusive judgment.
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Borrow Against Your Home Equity
If you have a house in your name, then home equity loans can turn out brilliantly.
How about a home equity loan that can be opted as the second mortgage? The first mortgage can be used to buy a property. If luckily you build upon it, then you can take loans on it too. Here, you borrow against the actual value of your house to pay up for the urgent needs.
Let’s assume that the value of your house is 3 crores, and the amount borrowed against it is 2 crores. The underlined are the benefits of such borrowing:
A tax deduction can be easily claimed. You can utilize the loan to buy, construct, or make beauty improvements.
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Margin Loans
Margin loans can help to make proportional investments in share. When you buy on margin, you take money from your investments company to put money into investments.
This type of borrowing helps you to buy shares at 1/4th the cost. The company uses the shares as a guarantee for the loan amount. This will be helpful to create a larger portfolio and diversify it. When you use your shares, and not sell them, and use equity to borrow.
The existing portfolio can also be used as collateral. This indirectly increases the overall investment corpus. Among all the different ways to borrow money, this one can be quite risky.
Here the glitch is that a margin rate can change according to the lender’s whims and fancies.
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Approach a Bank
This is one of the most popular ways of borrowings. When you approach a bank to apply for loans, they take a dive into your pool of financial information.
They go through your credit history and other important details to decide whether lending will be constructive or not. The purpose of investment is also very important, whether for scaling or starting a venture. And this way you will be able to meet all critical costs. If you’re 100% sure of your investments, it will be much easier to make an investment.
Make a note to take as much as you can return. Keep your loan to income ratio within feasible limits.
Read More: Online Personal Loans: When Need Quick Money
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Consider a Credit Union
Members of a credit union use its services. Out of all the other borrowings, this is the safest one. These credit unions charge about 1% on the amount borrowed. So, you gotta be a member before taking money out. Credit unions provide loans at low rates of interest along with financial advice and assistance.
5. Crowdsourcing
P2P (Peer-to-peer) lending is actually crowdsourcing for funding. This lender-borrower becomes even better with investment demands. This has been made possible without a physical financial institution in the foundation.
