Should I Take A Personal Loan To Invest In Mutual Funds?

Personal loan

Whether it is paying bills for unplanned medical expenses, funding your dream family vacation; pursuing higher education; or planning a grand wedding, applying for a personal loan is one of the most efficient ways to stabilize your financial condition. Personal loans are an unsecured form of loan offered without any collateral or security by various financial institutions at an affordable rate of interest and flexible repayment terms.

While the final loan amount depends upon the candidate’s eligibility and requirement, one can easily apply online through the lender’s website, such as Fullerton India personal loan, and get it approved quickly without any hassle. Additionally, one must calculate their monthly installments through a personal loan EMI calculator and be aware of various loan-related factors, including foreclosure charges, processing fee, repayment period, etc. However, personal loans should be used wisely to avoid any financially difficult times in the future.

Scroll down to know if a personal loan could be taken to invest in mutual funds.

Should I Take A Personal Loan To Invest In Mutual Funds?

  • High-risk factor

Due to no end-use restriction on the funds raised through a personal loan, the borrower could be easily tempted to invest it in multiple avenues such as stock market, mutual funds, shares, bonds, fixed deposits, etc. It has been widely observed that using the loan money for increasing wealth through government-based investment sectors offers steady yet low returns compared to equity instruments that promise higher returns with a high degree of risk.

  • Know your lender and expenses

Using a personal for investment purposes is called leveraging. While the income accumulated through shares or mutual funds can be used to pay an interest accrued on a loan, you must be certain about the lender’s interest rate and keep track of your mandatory monthly expenses beforehand.

  • Calculate your profits

Suppose the investment returns are almost equal to the interest rate at which you are repaying your loan amount. In that case, opting for a mutual fund investment without reaping any high profits is an even greater risk. Hence, it is only advisable to use the personal loan money for investment if and only if the return probabilities are on the higher side than the costs, and you possess a steady source of income. Similarly, leverage the personal loan EMI calculator available on the lender’s website to determine the overall interest payable for a specific loan amount after completion of the loan’s tenure.

  • Gain expertise about the industry

Even though investing in mutual funds from borrowed money is termed a recipe for disaster, few people also believe it to be a shortcut for generating easy money. Because equity markets experience unpredictable highs and lows, your investment could take a hit and land you in a financial mess. Therefore, one should perform in-depth research about the market patterns and gain business insight into the performance of various funds or stocks rather than investing blindly.

Using the loan money for mutual fund investors could be a great way of growing wealth that also helps build your credit score. However, it is only feasible when you possess enough knowledge about the ups and downs of the investment industry. For instance, when the market is on the rise, mutual fund investments usually guarantee higher returns. On the other hand, during the bear market syndrome, when the stocks are falling and investor confidence is low, such investments could prove to be very risky.

Final words

It is perfectly reasonable to accumulate wealth through savings over time. However, new-age options such as Fullerton India personal loan offer a more dynamic approach to multiply your wealth by investing in mutual funds and other portfolios. Your plans for growing your capital might increase your worries without prior computation and knowledge and give you sleepless nights. Therefore, proceed with caution and invest your money wisely upon much deliberation to reap maximum benefits.