Should i invest or give it back?

DJ13x

Hi all, 
I managed to get a personal loan of £19k over 6 years, 7% interest. 
I was planning on using this money to buy some land abroad but this has fallen through. Im wondering if its worth keeping this money and investing it as i think i could make some decent returns and i can afford the monthly payments in the meantime, or should i just cancel it and give it back as im still within the 14 day cooling off period. 

DJ13x

Edit- sorry i think the interest rate is 4% not 7!!

[Deleted User]

It very much depends on the returns you think you can make.

Yahoo_Mail

DJ13x said:

Hi all, 
I managed to get a personal loan of £19k over 6 years, 7% interest. 
I was planning on using this money to buy some land abroad but this has fallen through. Im wondering if its worth keeping this money and investing it as i think i could make some decent returns and i can afford the monthly payments in the meantime, or should i just cancel it and give it back as im still within the 14 day cooling off period. 

I'm assuming that you didn't tell the loan company the real purpose of the loan?  Very few allow personal loans to be used for property purchases.  Might be best to just return it rather than gambling it away.

HouseTargaryen

What I would do is get Excel out, input 2, 3, 4, 5, 6 or 7 different possible financial outcomes from keeping the loan and trying to invest it. Then assign a percentage next to each possible outcomes relating to your estimate on the chances of you achieving that outcome. Then get the average financial outcome from those figures using the % chance and see if that's above the 4%. Doing this will only be possible if you have an idea of a few ways of investing the money. If you don't, well, just hand the money back. Of course, if you can afford to lose the interest on the loan and having the loan won't affect you negatively due to the impact on your credit score, then you could always use this opportunity as a fun way to invest. Just don't go putting it all on Gamestop just before the bubble bursts!

[Deleted User]

6 years might be enough time to invest in an S&S ISA and see decent gains, just not great timing as markets are not doing too badly at the moment. I started one in 2017 and it's about 14% growth all in, has been as high as 20% and low as -5% iirc during the first covid dip. That said, many people speculate it's all a bubble that is going to burst, so if you lost a big chunk, how would you repay?

DJ13x

Deleted_User said:

6 years might be enough time to invest in an S&S ISA and see decent gains, just not great timing as markets are not doing too badly at the moment. I started one in 2017 and it's about 14% growth all in, has been as high as 20% and low as -5% iirc during the first covid dip. That said, many people speculate it's all a bubble that is going to burst, so if you lost a big chunk, how would you repay?

I can afford the monthly repayments out of my salary so thats not an issue. The loan would always be repaid.
I guess i was seeking advice more on whether it would be worth paying the 4% interest at the possibility of gaining more profits through something like a S&S isa.

Splash21

I would ask myself: Had I not been interested in purchasing land, would I have taken a loan out to invest? 

The answer is likely no. Use the 14 day period and repay. Forget about it (Y) 

DrEskimo

Hoping to achieve 4% net profit over a 6yr period is tricky enough. The likelihood of earning much more to actually make the investment worthwhile would be very slim.

Hand the loan back and then use the repayments you were going to pay each month to pay into a S&S ISA.

enthusiasticsaver

I would not go down the route of borrowing to invest.  There is no guarantee you will make decent returns let alone get your capital back. As DrEskimo says use the money you would have been using to repay the loan to do a monthly s and s isa contribution. 

Herzlos

I'd repay the loan and then put the money that would have been the repayments into the investment. It's less risky and should net you more money in the long run (and you don't need to beat 6% APR in order to break even).