Paying Off Loans or Investing - My Stand on the Both
Should debt be paid off or should the money be used to invest? This is one controversial topic among people and different people have their different standpoint and what they believe. In this post, I will be sharing my own standpoint and at the end of the post, you can also share your own views about this in the comment.
The Question
A person has $20,000 in cash and has a debt of $20,000 with an annual interest of 6%, will you advise him/her to invest in the stock market for a 10% annual income or pay of their debt?
First, debts are weights or yokes on a person. It might not be seen physically but it is there mentally. Debts causes a lot of emotional stress, and limitation that denies people from doing what they want to do. A lot of people will want to invest their money in some investment so they pay the debt with the interest made from investing and still have something to keep. This is one good way to look at it since you want to have something for yourself while you pay off the loan with its interest at the end of the year but let’s also see it from this angle. What would you do if you had a student loan of 6% to pay at the end of the year and you decide to invest the money into the stock market at the end of 2019, only to wake up in 2020 and see that the market is tanking really hard that shares lost 70% its value and there is a threatened recession since the economy is on a standstill? This is not good you say, it means that the loan interest is increasing and your investment just lost 70% of its value. Trust me, the economy isn’t going to normalize in 6 months (If any government tells you it will normalize, then you are just putting your hopes on lies).
A bird at hand is better than two in the bush
Let me say something straight, Investing is like looking for two birds in the bush while your money at hand is a bird at hand. If you decide to pay off the loan with a bird at hand, you could get a better job with enough time to search the job market without fear of not having money to pay debt, and then make money to start investing instead of taking the money that could have been used to pay the debt to go in search for two birds in the bush (A bird at hand is better than two in the bush).
Don’t live a middle class live even if you are in the middle
The middle class get loans for everything and pay back with percentage from their salaries. The middle class buy cars with loans from business corporative societies, get a house with a mortgage loan, pay their children to school fees with student loan and all this loans are dependent on their paycheck at the end of the month. What happens if you get fired? A bank in my country just sacked 75% of its employee and cut down the salaries of the 25% remaining by an average of 40%. What do you think a person in so much loans will do seeing that we are facing a threatened recession?
Loans can be paid in a financed way. That is, in installments.
If you have capital, and you plan to invest it, you can plan your ROI and pay off the debt progressively.
There is also the possibility of paying special fees and in this way decrease the interest on the debt or shorten the payment periods.
Wow! What a very beautiful analysis you've come up with and I also love your advice and regards to either investing or paying off debts.
As for me I'll say it really depends on the time frame you have to pay up your debts even though being a debtor can really be so frustrating and intimidating sometimes most especially if the money lender wants his or her money back.
But the fact is that if the time frame or time limit to pay one's debt is really much, it's advisable to invest the money into a profitable business that can yield double amounts of your investment. Once this is done, you can actually pay up your debts and keep or re invest the remaining amount of money.
Thanks for sharing this great post with love from @hardaeborla and I hope you are have a great day ahead ❤️❤️💕💕❤️💕❤️
I like your view, thank you so much for sharing your opinion.
Nice content @mojubare. It was a good read.
Like @eni-ola said; it is very wrong to acquire loans to propel personal needs. Best way to utilise loan is to fix it in an investment .
However; it's more than difficult to conclude on whether to pay your debt or invest the money when u hv enough to pay. The kind of loan you got defines what action to take.
Instead of putting all the money into investment, I will just split the money into a considerable amount, I will pay the debt with most of the money and the other percentage will be used for investment.
Thanks for sharing your opinion.
Debt and investment in so many cases works hand in hand. There are good debts and there are bad debts. The rich and business owners understand this things. Using a loan for personal uses is completely wrong forget whatever type of loan it is called because i loan should be used for something that will bring return for the borrower to be enough to pay back the debt and make profit.
A lot of average people do not understand this and that is the reason why most of their lives is usually filled with debts.
Putting all your funds into investment when you still have outstanding debt is a very risky game to me and I would not try such.
Very risky game,thanks for sharing your opinion
I think that now we have to be very careful with everything that concerns investments, money, the economy is very bad, and it does not seem to improve in the medium term. Those who keep their jobs, it is good that they save, and if we are talking about investments, think about it, we are not in times of losing money.
But taking out loans can always be a double-edged sword. It is better to wait for some stability so that you can have a clearer vision later on.
Taking loans at this time does not sound very safe to me, thanks for sharing your opinion.
@tipu curate
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it's a risky game, and I particularly I would rather be doing 50 and 50, It seems to me the safest and least damaging way.Of course I'm just an amateur.Thank you for sharing this interesting knowledge.