Should you use a Personal Loan to Invest in the Stock Market?
When you take a Personal Loan you mostly have a clearly defined use for it, like paying for a child’s higher education, for medical expenses or any other expense. These loans can be a quick way to get some cash, without the need for providing security. You usually do not have to explain how the loan is going to be used to the lender.
Also Read : Popular Reasons to Take a Personal Loan
If You Want to Use the Funds to Invest in Shares, You need to Consider Certain Points :
- Do you have enough experience in investing in the stock market to anticipate the fluctuations accurately enough to protect yourself against huge losses?
- If you discover an investment opportunity, do you have enough information on it to be sure that it will do well and provide enough returns to justify the investment?
- You have to keep in mind that whether you gain or lose, you still have to repay the loan, with the interest.
- If your investment does not pay off as anticipated, have you considered how you will pay off your debts?
- Personal Loans have to be repaid in a short period of time. It might take longer for you to actually see the result of your investment.
If you have considered all these and other factors and are still sure that you want to use a Personal Loan to invest in shares, you can explore the many Personal Loan offers from banks and NBFCs.
How to Apply for a Personal Loan
Financial institutions have made it very easy to apply for a Personal Loan and get it approved. The entire process can be completed online. Check the many Personal Loan offers available from different finance companies. Consider various factors including the Personal Loan interest rates. Decide who you are going to take the loan from and log on to the company's website and apply for the loan. Bajaj Finserv explains the basics of applying for a Personal Loan quite well.
Eligibility for a Personal Loan
Before you actually apply for a loan, check the bank or finance company’s website to ensure that you fulfil the eligibility criteria. Different companies have different policies regarding Personal Loan Eligibility. Whether you are salaried or self-employed, you have to meet certain requirements to apply for the loan. The factors considered might include some or all of the following:
- Proof of a minimum amount of income, per month for the salaried and per annum in case of self-employed individuals.
- Proof of age. You have to be within a certain age bracket to be eligible. This might differ according to the lender.
- You might also be asked to provide proof of work experience.
- You might also be asked to furnish proof of a minimum period of residence in your current home.
If you meet all the requirements, you can apply for the loan.
Also Read : How Personal Loan Applications are Processed
You will then be asked to furnish the required documents. Once these are verified, you loan will be approved and the amount credited to your account. You can then use it to invest in shares. Draw up a clear plan for the investment and stick to it.
Set Goals for Your Investment Plan
If you want to use a Personal Loan to invest in stocks, you also need the safety net of a regular income to ensure that you can pay off your loans. Some simple rules can help you keep your vision clear.
- Plan on how long you want to continue investing before you see a definite gain that justifies your investment.
- Be sure that you will still have your current job at the end of the defined period, whether employed in a company or running a business.
- Be sure that you will have enough money to put aside as savings to cushion you in case of a loss on your investments.
- Keep your profit goals small and pick shares that will perform well over a long period.
Taking a Personal Loan for investment in shares is a good idea if you have enough experience in the stock market and you have a clearly defined plan with definite goals in place.