Taking a loan to fund an ISA

tony_Surrey

My ISA is returning 12% annualised interest. Why shouldn't I borrow 20k from M&S at a fixed rate if 6%?

masonic

If your ISA has been returning 12% what makes you think it will continue returning 12% annualised interest? I'm not aware of any investment that guarantees an interest rate of 12% without significant risk of not only failing to return that 12%, but also failing to return your capital.

Ayr_Rage

It would be a miraculous Cash ISA if it was getting 12% INTEREST.

I guess you mean it is a S&S ISA that has made that return and with markets at or near all-time highs don't bank on the next year being so good.

You could always take a punt as long as you can afford to pay back the loan no matter what happens to your ISA, but if you need to realise profits don't forget dealing charges along with other fees.

Alexland

If this is an interest rate are you sure it's not a scam?

The best buy Cash ISAs tend to pay around 5% interest at the moment.

Perhaps you have got a 12% investment return by taking risk?

If so what kind of investment have you made?

QrizB

Two and a half years ago I took a £15k personal loan at 3%, used 6k to buy a used car and put the other 9k in my SSISA.

It's turned out well (my fund is up significantly) but I was fully aware of the risk that my investments might fall. I was prepared to make the loan repayments from income regardless of investment returns.

If you want to live dangerously, and can cover the payments if it all falls apart, I'm not going to try and stop you.

eskbanker

tony_Surrey said:

My ISA is returning 12% annualised interest. Why shouldn't I borrow 20k from M&S at a fixed rate if 6%?

Because of the risk of losing the lot, as above?  Which company and product is your ISA with?

Eyeful

1. The best Cash ISA at the moment = 5%
So if this is a Cash ISA paying you 12%, it is a scam.

2. Investing means "putting your money at risk". No one can foretell the future.
If this is a Stock & Shares ISA, the returns can go, up/down/stay the same.

3. What is the investment risk you are running?
Taking the FTSE 100 as reference.
Your ISA = 12%
FTSE 100 = 3.84%
Risk Ratio = 12/3.84 =3.13    (for me ,very high risk starts at Risk Ratio = 2)       
Your Risk Ratio = 3.13         ( I think you are at a very, very high risk level)

4. I would never take a loan to invest in the stock market. Far too many persons have got burnt that way.
.
    Investing in the stock markets when the markets are at very high levels and using loans to do so, is
    classic newbie behaviour. Most times this happens, just before the markets fall heavily

VNX

tony_Surrey said:

My ISA is returning 12% annualised interest. Why shouldn't I borrow 20k from M&S at a fixed rate if 6%?

Which ISA do you have?

jimjames

tony_Surrey said:

My ISA is returning 12% annualised interest. Why shouldn't I borrow 20k from M&S at a fixed rate if 6%?

That would be a great interest rate if it was true. The best ISA on MSE is showing as just over 5% interest, how have you managed to get an interest rate of over double that? 

VNX

jimjames said:

tony_Surrey said:

My ISA is returning 12% annualised interest. Why shouldn't I borrow 20k from M&S at a fixed rate if 6%?

That would be a great interest rate if it was true. The best ISA on MSE is showing as just over 5% interest, how have you managed to get an interest rate of over double that? 

The silence is deafening 

Qyburn

I think we can take it as read that it's an investment ISA that's proposed. So makes this idea similar to "leveraged" investment schemes.  OP stands to win if his guess is correct, lose if not, either way the magnitude of gain/loss is much greater than investing his own money.