It’s much easier to make more money with money than to start from scratch. Above all, the super rich, who often live on their huge interest, know that. Even with a loan, if the borrowed money is used smartly and reinvested, you can make a profit. Here are a few ways that this can work.
“When you work, you don’t have time to make money," this well-known quotation exaggerates what many investors know. Money works when it is available, and whoever can make it work for them has a huge financial advantage.
Earning with the help of loans is also possible, provided they are used wisely. Basically, many investors and entrepreneurs repeatedly use loans to increase their wealth. There are a number of interesting ways in which you can use such loans.
As exciting as this possibility may sound for many, the implementation is so tricky: Because there has never been an investment that can be made without any risk. So if you make a mistake, you may end up making nothing out of earning credit. Or even worse: In some, albeit rare, cases, a lack of luck can be decisive. For this reason, one should be very careful when investing money from loans. But if you act cleverly, the bottom line is that you can significantly improve your finances.
Here are some examples of how you can make money with a loan:
1. Invest in real estate
The real estate market is generally considered one of the safest and most lucrative. Quite a few super-rich made their fortunes with intelligent investments in buildings and properties. The bottom line is even a simple mortgage loan that we take on a home, an investment that can be worth it.
The idea here is this: you take out a mortgage loan on a house. Real estate prices rise over the course of several years. The bottom line is that at the end of the repayment period, the acquired house is worth more than the entire loan, including loan fees and interest. The excess determines the return on the investment.
For this reason, many people prefer to use a loan to buy a home rather than rent. And in many cases this calculation works. But there are a few things you need to consider in order to successfully make such an investment:
- The property must be purchased at an attractive price
- The credit costs must not be too high
- You have to be able to maintain the repayment over the entire period
- After all, the property must actually be sold at a profitable price
Only if these points are met can a mortgage loan become a successful investment. And there is an additional risk with this calculation: In the event of a real estate crisis, it can happen that the prices for houses generally fall significantly. The house in which the investment was made is also affected. Such a situation would make earning money using real estate loans a losing deal.
2. Invest in securities
On the stock exchange, it sometimes happens that investors invest in shares on credit. Stocks can potentially increase in value many times over, while the cost of a loan is capped by credit costs and interest rates. The profit potential is high if the market is correctly assessed.
This approach is quite common among broker experts. However, one takes an enormous risk with such an investment. Because stocks are generally very volatile. This means that you can fluctuate significantly in their performance. Such an investment can only be profitable if you can assess the market situation particularly well. And this is an extremely complex matter that very few people understand. The tricky thing about such an investment: credit installments are always due on the key date. In contrast, stocks do not adhere to any dates in their performance.
So it can be that you get into difficulties with the repayment even when investing in the right security. Because the market development can sometimes be significantly slower than expected.
3. Earn with credit: the company loan
If you invest in a company and take out a loan for it, you can benefit in many ways. If the company successfully invests the money and becomes more valuable in the future or writes higher profits, then you’ve done everything right.
The loan sometimes pays a multiple of its costs, sometimes in the form of profit shares over a very long period. If it is your own company in which you invest, this can sometimes change a life.
But the risks should not be neglected here either. Investments in companies also take a certain amount of time before they bear fruit. It can take months or years to achieve the positive effects, and that is how long you have to be able to manage the credit rates or costs. And in the worst case, the positive return will not work at all – namely if the investment turns out to be wrong.
If you look at these three examples, it quickly becomes clear that investing in credit is a complex matter. Only those who are able to weigh opportunities and risks realistically have the chance of making a positive investment. Accordingly, one should be particularly careful as a beginner in this area. In most cases, it makes sense to forego outside capital for investments. However, if you are willing to take certain risks, you can certainly take a closer look at such options.