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To Pay Off Loan or Invest .... Advice please ....
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Pirate
#1 Posted : Wednesday, November 09, 2011 9:12:03 PM
Rank: Member


Joined: 4/4/2007
Posts: 91
Hi Wazuans ,

I need some advice on how whether to finish off my loan or invest ...

I took a 4yr loan of 1.4m and have 1 and 1/2 yrs left to pay the balance which is 560k , repayment of about 39k per month .

Now I have some 800k which is planned for passive investment due to my nature of work ( i travel frequently ) but with the increase in interest rates , im wondering if it is wise to pay off the loan . No interest is charged on prepayment, thank God for CBA :)

Knowledge is power , but action gets things done ...
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Nabwire
#2 Posted : Wednesday, November 09, 2011 10:38:47 PM
Rank: Veteran


Joined: 7/22/2011
Posts: 1,325
Honestly if I was you I wouldnt use the 800k to pay off the 560k in a lumpsum. I would continue paying the 39k then take the 800k and invest it in portions in valued stocks, the ones that are beaten down but are good companies. By the time we get out of this bear, you will have invested in good companies at throw away prices plus most importantly you will get dividends which could someday cover the 39k payment. Its all about playing with their money and beating them at their game. But for this to work you have to be an aggressive investor, forget about passive.
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jerry
#3 Posted : Wednesday, November 09, 2011 10:57:05 PM
Rank: Elder


Joined: 9/29/2006
Posts: 2,570
Keep ur original plan of investing 800k even if it means in a fixed account as u look for better options. This will make ur brain active even if the investment is passive.
The opposite of courage is not cowardice, it's conformity.
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butterflyke
#4 Posted : Wednesday, November 09, 2011 11:33:38 PM
Rank: Elder


Joined: 5/1/2010
Posts: 3,024
Location: Hapa
you will already have to pay the interest on the loans so invest the 800k in something worthwhile and pay off the loan gradually.

but if the change in interest rates means higher repayments on the loan, then you might consider paying it off.
Float like a butterfly, sting like a bee. - Muhammad Ali🐝
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madhaquer
#5 Posted : Sunday, November 13, 2011 7:45:15 AM
Rank: Member


Joined: 11/10/2010
Posts: 281
Location: Nairobi
Do not underestimate the peace of mind that comes from being debt free. If you can pay them off, do it! The bank will not forget that, It also makes you eligible for borrowing again if you have to.

I don't know what you plan on using the 800k for but I think you should put it in a spreadsheet and project the cashflows from whatever investments you are considering and see if it will cover the investment capital, and if the returns over the 1.5 years are above 39k a month.

I those investments will net you over 39k a month, then you can have your passive investment pay off the loan for you.
Otherwise, pay of the loan and put the extra into starting your investments and now you can comfortably put in 39k from your pockets into those investments monthly without the shadow of debt.

Please read my first sentence again. HTH
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GGK
#6 Posted : Sunday, November 13, 2011 8:48:24 AM
Rank: Member


Joined: 11/21/2006
Posts: 608
Location: Ruiru
Whatever you do.... don't pay that loan.
Stocks at NSE are currently dirt cheap. Your 800k can give you capital gains (n some dividends)to cover the interest you pay CBA.

If you pay the loan... what next?

Keep your ears to the ground for any investments option. Don't be passive
"..I am because we are. "― Ubuntu, Umtu,
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dijkstra
#7 Posted : Wednesday, November 16, 2011 10:43:46 AM
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Joined: 11/28/2006
Posts: 91
If the guaranteed interest (after tax) you get from the investment is higher than the interest you are paying on the loan, then invest otherwise pay off the loan and invest the surplus.
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kitten
#8 Posted : Thursday, November 17, 2011 10:15:52 AM
Rank: Hello


Joined: 11/17/2011
Posts: 1
Location: kile
if i were you i would ask if i took a loan just to offset it. unless the initial objectives were met, reinvest the money. in any case were you to die i guess the loan would be settled by your insurers.
“Public sentiment is everything. With public sentiment, nothing can fail; without it, nothing can succeed. Consequently, he who moulds public sentiment goes deeper than he who enacts statutes or pronounces decisions.” Abraham Lincoln
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McReggae
#9 Posted : Thursday, November 17, 2011 10:43:00 AM
Rank: Elder


Joined: 6/17/2008
Posts: 23,365
Location: Nairobi
@madhaquer: you should note that not all the 39K is interest on loan, part of it makes the principal thus if his investment can take care of the interest on the loan then he is better off investing the 800K!!!
..."Wewe ni mtu mdogo sana....na mwenye amekuandika pia ni mtu mdogo sana!".
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