Is there an interest rate that could tempt you to borrow?

[WalkaboutStache]

If you were able to get a loan with the features below, is there an interest rate that would tempt you?

• Unsecured
• Repayment term of up to 5 years
• Principal not to exceed your yearly salary

Right now, my bank (non-US) offers a 5 year loan term at about 2.69%, which sounds pretty good since inflation make that pretty close to free money. I have asked my manager if he can get me a better rate, which he might since the year is coming to a close and there may be some kind of incentive to hit sales targets.

What do y'all think?  I have no immediate need for a loan, but I am tempted just to have dry powder at hand to invest or buy my little retirement pad.

[RWD]

Five years is a pretty short time period to count on the stock market beating a given rate. Historically there has been about a 1 in 5 chance that the SP500 will return worse than 2.69% over a 5 year period.

Though you could consider borrowing to put into something like I-bonds if you haven't already used up your maximum.

[MustacheAndaHalf]

Five years is a pretty short time period to count on the stock market beating a given rate. Historically there has been about a 1 in 5 chance that the SP500 will return worse than 2.69% over a 5 year period.

Only 1 in 4 years have negative stock returns, although they do clump together in crashes.
https://www.icmarc.org/prebuilt/apps/downloadDoc.asp

Portfolio visualizer lacks data for the full 1970-1974 period, so the only negative non-overlapping 5 years with a loss I see is 2000-2004.  Even then, with 3 years of dot-com crash, the return annualizes to -1.4% per year.

If you were able to get a loan with the features below, is there an interest rate that would tempt you?

• Unsecured
• Repayment term of up to 5 years
• Principal not to exceed your yearly salary

Right now, my bank (non-US) offers a 5 year loan term at about 2.69%, which sounds pretty good since inflation make that pretty close to free money. I have asked my manager if he can get me a better rate, which he might since the year is coming to a close and there may be some kind of incentive to hit sales targets.

What do y'all think?  I have no immediate need for a loan, but I am tempted just to have dry powder at hand to invest or buy my little retirement pad.

Let's say it works, and you get +60% in 5 years, and you repay the loan plus 14% interest.  What does that other 46% do to your overall assets?  Does it move up your retirement date?

If it has a significant impact, the risk could be worth it.  The market is more likely to do well over 5 years than have a loss.  If stocks do well for a few years, and CDs are paying 3%, you could even switch from stock market to CDs to lock in your gains.

But you need to also figure out what happens with a loss, and see how much damage that does to your assets & retirement date.  That's what I would balance: likely loss/years of extra work versus gains/years of extra retirement.

[ChpBstrd]

EarlyRetirementNow posted instructions for how they obtained cash at 1.68%.
https://earlyretirementnow.com/2021/12/09/low-cost-leverage-box-spread/

Such a "loan" is unsecured (if using European style options that are not callable), can be rolled indefinitely every year or two obtaining something near the risk-free rate each time, and can be scaled to whatever size you like. 

Of course, we're living in the "everything bubble" where the prices of bonds, stocks, and real estate are all far above their historical valuation metrics, so I'd be reluctant to go leveraged right now on any investments with significant downside. For a horror story about leveraging at the top, see: https://www.bogleheads.org/forum/viewtopic.php?t=5934

I am tempted to "borrow" about $100k through box spreads at ~1.7% to pay down my 3.25% mortgage - but a $1500/year ROI isn't life-changing, even if it is just for clicking buttons and doing taxes.

To change one's life with leverage, one would need to scale up the leverage and take on some measured amount of risk. Options can be used to construct portfolios with limited downside that might be appropriate for massive leverage.   

[DaTrill]

Borrow $1,000,000,000,000 at -1% for 30 years, live of the $10,000,000,000.   

[Syonyk]

If you were able to get a loan with the features below, is there an interest rate that would tempt you?

Maybe 1%... if I had some specific use for it?  I wouldn't borrow money just to borrow money, even at 0%.  It's an unpopular opinion around here, but "can't fail leverage" seems to have a way of doing just that, often enough to make it riskier than I prefer by a good margin.

We have nothing but monthly recurring debt at this point, and I've no interest in changing that outside perhaps a vehicle purchase at some point (backhoe with a loader).  Even then, I'll probably just pay cash one way or another.

[vand]

Would happily borrow x1 annual salary if someone offered it to me uncallable and unamortizing @ 3%.

[ExitViaTheCashRamp]

I live in the UK and it is really easy to borrow on credit cards at 0% for significant periods (two years is easy to find). For most of the past 15 years or so, I've enjoyed borrowing at 0% for the duration of the cards 0% offer and put the cash into a savings account. Made a few thousand £ over that time for tiny amounts of work. The best point was £15,000 on cards and 6% interest being paid.. this was before the '07 crash though.

 These days with interest rates so low, the balance on the 0% cards go into premium bonds, a kind of state lottery where your principal is never at risk and can be withdrawn at any time (so long as the UK state does not go bankrupt I guess) but the bond pays out via a lottery each month. When the 0% time runs out, I'll withdraw the principal and give it back to the bank that issued it.