+12 votes
by (250 points)
Should I invest using borrowed money? I just got a HELOC with a 2. 75% intro rate for 3 years. I am using it to consolidate some high interest debt but was wondering if you think it is a good idea/wise to borrow additional funds on the HELOC to invest in something that garners more than the intro rate? Perhaps the Golden Butterfly?  
Should I invest using borrowed money?

10 Answers

+6 votes
by (6.8k points)
 
Best answer
Never invest borrowed money. Investing carries risk, and there’s a chance you could lose it, but you’d still have to pay it back. Plus it’s tough growing investments while you have to make payments from it.  
+3 votes
by (1.9k points)
No no. Be debt free
+3 votes
by (8.3k points)
A thousand times no.  
+5 votes
by (6.3k points)
Could you pay it back if the market dropped more than 15%? Don't risk more than you can reasonably afford.  
+2 votes
by (320 points)
Investing on margin is one of the major factors that led to The Great Depression.  
by (2.6k points)
@hovel2164 investing in houses led to the great recession in 2008.  
by (320 points)
@phooey10 And?  
by (2.6k points)
@hovel2164 maybe investing on margin isn't that bad.  
by (320 points)
@phooey10 Again, investing on margin was one of the biggest contributing factors to The Great Depression.  
by (2.6k points)
@hovel2164 similar to using mortgages to invest in houses in 2008.  
by (8.3k points)
@phooey10 Yeah but like. not really though.  
by (2.6k points)
@iconostasis23 how so? House prices never go down, you have to get on the property ladder ASAP, we've eliminated risk /sarcasm
+9 votes
by (880 points)
Absolutely not!  
+4 votes
by (2.4k points)
The only borrowed money I would use for investing is in a rental property
+5 votes
by (2.6k points)
It's not all that different from taking out a mortgage as you're investing in an asset either way. It's more straightforward to sell the asset off if you get in a crunch as you can sell your shares off and get your money in a day or two usually. However, if you've still got debt lying around (e. g. why you got the line of credit in the first place), I'd argue pay that off first. You're getting a guaranteed return of whatever your interest rate is. Plus you want to avoid any penalty interest if you don't pay off the line of crrdit at the end of the term.  
+11 votes
by (1.3k points)
This way of thinking is probably why you have the original debt to begin with. Consolidating debt does nothing if you are just going to pile more on. Pay it off, be done with it.  
+8 votes
by (330 points)
If you're gonna invest using borrowed money. Do it the right way. Get a Payday loan.  
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