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Friday, September 27, 2013

Spending Money to Make Money: 3 Reasons to Consider an Investment Loan

Taking out loans and being in debt is generally not considered ideal for our financial position. The concept of being 'debt free' conjures up very pleasant images and seems to be something that we all strive towards. Of course, freeing yourself of debts is an admirable goal and something that helps many people achieve the sort of financial position that they covet, but what about when getting a loan is actually something that will facilitate more financial freedom long-term? There's an old saying that dictates that you have to spend money to make money, and while jumping on the first instant cash loan you come across isn't always advisable, there are certain situations in which a cleverly-sourced injection of funds can be the catalyst for far greater wealth. Here are a few examples:

Expanding Your Business

Most businesses are far more fluid concepts than they seem. A good businessperson is always on the lookout for new opportunities and ways in which to expand their business, and often when cash is tied up in assets or other activities a loan is the quickest and smartest way to capitalise on those opportunities. For example, if you own a restaurant and the shop next door suddenly comes up for sale, it may represent an opportunity to expand and seat more people, which means more profits. Alternatively, it could provide you with the opportunity to do a long-awaited renovation and upscale the quality of your business, attracting higher-end clientele and raising your income. In this case, the projected profits and income outweigh the liability represented by the loan, which makes it a smart business idea.

Investing in Property

This is one of the most common reasons people take out loans, and while it is a huge undertaking it is one way to inch your way towards financial security. Owning a home is something that makes up a big part of the Australian Dream, but more importantly, it represents security. In terms of buying a home to live in, the long term liability of a loan is more than worth the risk given the amount of rent that would be squandered away over the same time period. In terms of property purely as investment, you may wish to rent it out or renovate and up-sell the property, both of which are decisions for your long-term financial freedom.

Stock Market

This option is slightly more risky than the other two, but nevertheless if you feel confident that investing in certain stocks is going to improve your financial position in the long run then a loan could be the perfect way to get the cash you need to inject. Be warned though, the stock market, especially in recent years, is a volatile place and you need to be sure of your ability to pay back whatever you borrow, with or without your expected income from the stocks.

While the thought of taking out a loan and being indebted to a bank or loan provider can be daunting, it's important to think long term in every situation. While fast loans can seem reckless, there are some occasions in which they will more than pay for themselves in the profits they create.


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