It is not always so that people borrow money through personal loans for emergencies. Like, Oriental Bank personal loan can also be availed for investments. These investments can be business-related or investments in stocks or other classes of assets. When on the brighter side there is an opportunity for enormous profit, at the same time there is a probability of losing all the money invested. Thus before making this investment you should finish reading the blog, as it contains necessary information regarding personal loan investment in the stock market.
The term used for investing in personal loan over the stock market is known as leveraging. Since investing in the stock market pays back with a huge return, thus anyone can easily repay the loan with a small profit alongside. Further, there are various advantages as well as disadvantages that are described down below:
Pros- The positive aspect of this case is highlighted below:
Higher corpus- While availing the option of a personal loan in order to invest in the share market, a higher corpus of funds is accessible to the investors. As a personal loan can provide funding for huge amounts, thus there is no requirement for making sacrifices like cutting down one’s salary or dividing savings money.
Greater benefits in tax- Under the norms of taxation, anyone can claim dual benefits with a personal loan. One of which can be Section 80C of the Income Tax Act in India, under which concession is granted on the investments. While the other benefit comes from the rebate or offers available for repaying loans
Repay credits with profits- Although a personal loan comes with a baggage of additional expenses like interest rate and serving charges. But if the investor is experienced enough and knows about the stock market then he/she can gain enough profit to repay the loan in one go.
Cons- The negative aspects of this scenario are highlighted below:
High-interest rates- personal loans charge a high rate of interest which is added to the principal amount during repayment of the loan. As the stock market is subjected to risks, one cannot be sure of the fact whether he/ she will be able to repay the loan along with the interest rate.
Negative return- Another probability that is often probable in the stock market is negative returns. If the money is not properly invested under stocks then there might be a huge loss in place of gain. Further not allowed to repay the credit borrowed.
We have put up the mirror regarding the issue, distinguishing the pros and cons of this scenario. Further, it is dependent upon your decision because at the end of the day the profit is yours and so is the loss.
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