Using a Personal Loan to Invest: Yes or No?

A common way to start preparing for your retirement is by investing funds into a portfolio covering stocks and bonds. However, to invest, there must be a sizeable investment which calls for cash. A Nielsen global survey found that in the last quarter of 2016, only 59 percent of Malaysians continue to save compared to 67 percent at the beginning of the year. So with declining savings, what options do you have for building your wealth?

Taking out a personal loan to invest in commercial properties can pay off with a nice return if you approach your investments the right way. It is generally thought that this approach is a definite no because of the uncertainty. So how do you know this is the right option for you? Well if you are considering this option, here a few things to look for.

Using a Personal Loan to Invest: Yes or No? by CF Lieu - Certified Financial Planner Malaysia

Consider Rates

It is vital that you look at the available interest rates being offered by your lenders. It does not matter if your investments make a nice return if most of it is being swallowed up in interest payments. In September 2017, the average bank lending rate in Malaysia was 4.62 percent. With high enough interest rates, once monthly repayments are done you really won’t be left with anything. The use of comparison websites can help you view the available rates and current offers such as on

If you are looking to invest as a way of saving for retirement or paying off other personal debts, the ideal condition would be for regular returns from your investment so as to service your other payments and pay down your debt. To be safe, consider whether you can manage your loan payments should you have to wait a little longer to see any returns.

Account for Other Fees

Interest payments are not the only fees that come with personal loans. Certain lenders may charge one-off fees or additional buffer fees for lower credit scores.Two examples are management fees that come with portfolio management and investing in mutual bonds and funds. Making sure you understand the entire repayment structure and fees can make all the difference in your decision to invest using a personal loan.

Attitude to Risk

Lastly but importantly, assess your comfort levels with risk. Taking out a loan to invest is one of the riskier options and if failed, can open you up to more debt and financial woes. Even when investing with your own money, you should still consider that the stock market is constantly changing and is not for the faint-hearted. If the risk associated investing seems a little too much for you then this route may not be the best option for your investment plans.


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