Using inflation to my advantage?

Tony789

So looking at the loan deals and ISA deals on this site in theory I can borrow £20000 at4.9% APR (my credit score is excellent) and invest in a 3 year fixed ISA at 3,71% annually, Assuming I can make the repayments would I not benefit from doing this and then at the end of the three years pay off the loan as the rate of inflation would have reduced the value of the loan by more than the net difference in interest that I paid? 

MorningcoffeeIV

No. You'd pay more in interest than you would earn, so would simply be setting fire to your money.

You'd also need a good salary and good credit history for that borrowing. Your credit score won't be considered by the lender.

DrEskimo

Inflation would only work in your favour if you used the money today to buy something that in 3-years time would be more expensive due to inflation.

If you just stick it into a fixed savings account it will also lose value due to inflation.

diystarter7

DrEskimo said:

Inflation would only work in your favour if you used the money today to buy something that in 3-years time would be more expensive due to inflation.

If you just stick it into a fixed savings account it will also lose value due to inflation.

Hi Op
As above but to be a bit more clear EG, no offence to Dr E

You buy a house for 100k today.  Inflation runs at 10% per year for 5 years. You sell at 5 years.
You get back  161051 quid which would match inflation.

Anything more than that beats inflation

Thanks

Grumpy_chap

Tony789 said:

So looking at the loan deals and ISA deals on this site in theory I can borrow £20000 at4.9% APR (my credit score is excellent) and invest in a 3 year fixed ISA at 3,71% annually, Assuming I can make the repayments would I not benefit from doing this and then at the end of the three years pay off the loan as the rate of inflation would have reduced the value of the loan by more than the net difference in interest that I paid? 

You will pay interest on the money at 4.9%
You will earn in interest on the money at 3.71%
That is already a loss.
The interest earned will also (subject to your personal circumstances) be subject to income tax, so making the loss larger.

Jinglish

In theory I suppose you could play the system, but this is not inflation busting nor in my opinion worth the effort but could this work???

 

>Let's assume you have an existing credit card with a £10k limit.

>Apply for 0% balance transfer card with 0% fee and hope you get the matching £10k (probably not so would need a few assuming they still exist e.g. NatWest/Sainsburys etc...

>Since there are no 0% & no fee money transfer deals you could use PayPal to pay "yourself" to get the £10k into your bank account for free.

>You can now balance transfer the £10k from the first card onto your new 0% card(s).

>Invest the £10k money into the highest paying savings account let’s assume 5% for now.

 

Caveats

>You will need to make the minimal monthly payments on the 0% cards so assuming 1% will need to pay approx. £100 per month.

>You will need to stop withdraw and clear the cards before the 0% expires.

>Assuming not an ISA the interest could be taxable if you go over your allowance.

>This might impact you credit file so suggest you avoid it if you are planning on re-mortgaging etc..

 

So, you would need to outlay £1,200 (spread over 12 months), have a smashing credit report and be able to borrow the money for free, to make £500. Not worth it in my opinion but others could look at it as at good return.

Please fee free to pick holes in the above as I have not done it personally