The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: seeking_north on February 21, 2014, 04:30:50 PM
-
I have the chance to borrow $50K from my company ( large Fortune 100 company ) at a 2,75% intrest, which has to be payed back during the next 8 years.
From this I can deduct 27% on my taxes, effectivly borrowing at 2%.
My thougth is to put it all into well diversified index portofolio.
Any thing I should consider?
-
Seems great, as long you understand the risks associated with investing in the stock market with leverage.
-
Are you required to pay back immediately if you are separated from the company? Or any other kind of golden handcuff-type restriction? Many people do not realize that loans from 401k accounts convert to an early distribution (with tax consequences) if not paid promptly after losing a job. It adds insult to injury to someone kicked out unwillingly.
-
Yes. Payed back immediately... or atleast a couple of months.
-
Do you have a mortgage? Using the money to pay down a mortgage and establishing a HELOC to draw from if you need to pay back the loan immediately strikes me as a cleaner arbitrage.
Interactive Brokers will lend you 50K @ 1.58% if you want to pick up a little extra juice (the cost of borrowing falls as you borrow more). The upside is that the loan won't balloon if you leave your job, the downside is that the rate is subject to an increase if short term interest rates rise.
-
^+1