Author Topic: $35k (Maybe) Loan  (Read 3493 times)

EricL

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$35k (Maybe) Loan
« on: June 27, 2019, 04:46:37 PM »
For a couple years I've been receiving bank offers for "up to Thirty-Five Thousand and 00/100" loans with "FIXED APR as low as 4.99%" with payment period ranging up to 60 months.  Typically I shred them.  But a part of my brain thinks "Wow, $35K up front!" 

For perspective, I'm a retiree with a $40k a year annual pension and over (or slightly under depending on Trump shenanigans) $1 million in investment assets, an 800 credit score and no liabilities except a desire to live in expensive ass California.  I could totally take a $35k loan up front and pay it off plus the interest no sweat for living expenses and luxuries.  Maybe even invest some of it and make money if the markets do OK. 

Is there a real benefit to doing so?  Pitfalls I'm not seeing?  Or is the instant gratification part of my brain just trying to screw me again?

happy

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Re: $35k (Maybe) Loan
« Reply #1 on: June 27, 2019, 05:28:13 PM »
Why on earth would you want to do this? Its definitely going to cost you 4.99%... and you may or may not make more than this on the market. Why go into debt for "living expenses and luxuries?"
There would be better ways to get an interest free loan such as a 0% balance transfer  credit card, if you really must.

EricL

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Re: $35k (Maybe) Loan
« Reply #2 on: June 27, 2019, 06:25:54 PM »
Why on earth would you want to do this? Its definitely going to cost you 4.99%... and you may or may not make more than this on the market. Why go into debt for "living expenses and luxuries?"
There would be better ways to get an interest free loan such as a 0% balance transfer  credit card, if you really must.

Thanks.  So a vote for face punch worthy instant gratification thinking.  Yeah, that's why I shredded the previous offers. 

soccerluvof4

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Re: $35k (Maybe) Loan
« Reply #3 on: July 03, 2019, 03:06:57 AM »
Why on earth would you want to do this? Its definitely going to cost you 4.99%... and you may or may not make more than this on the market. Why go into debt for "living expenses and luxuries?"
There would be better ways to get an interest free loan such as a 0% balance transfer  credit card, if you really must.

Thanks.  So a vote for face punch worthy instant gratification thinking.  Yeah, that's why I shredded the previous offers.




I have to double this sentiment. I know what your thinking but the risk/reward is not worth it at all

EricL

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Re: $35k (Maybe) Loan
« Reply #4 on: July 03, 2019, 01:57:56 PM »
Why on earth would you want to do this? Its definitely going to cost you 4.99%... and you may or may not make more than this on the market. Why go into debt for "living expenses and luxuries?"
There would be better ways to get an interest free loan such as a 0% balance transfer  credit card, if you really must.

Thanks.  So a vote for face punch worthy instant gratification thinking.  Yeah, that's why I shredded the previous offers.




I have to double this sentiment. I know what your thinking but the risk/reward is not worth it at all

Thank you for your input!  It's kind of sad that so many people read this without giving a reply either way.  I can understand not having time for a thoughtful response FOR taking such a loan.  I can't understand why it isn't worthy of a quick face punch reply against.

happy

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Re: $35k (Maybe) Loan
« Reply #5 on: July 03, 2019, 05:25:30 PM »

Thank you for your input!  It's kind of sad that so many people read this without giving a reply either way.  I can understand not having time for a thoughtful response FOR taking such a loan.  I can't understand why it isn't worthy of a quick face punch reply against.

Haha, so you are looking for more face punches?  ;)

I thought you'd get more too, but sometimes I see threads running for pages over a topic I think is really ridiculous and other times, not much is said about something I think is worth more. Shrugs/  Just the way things work I guess.

EndlessJourney

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Re: $35k (Maybe) Loan
« Reply #6 on: July 04, 2019, 08:06:33 AM »
If it is "no problem" to pay off the principal + interest, why not just save up then and buy the luxuries with cash instead of debt?

If it's to purchase stocks, why not borrow against your existing investments using margin? Margin rates are a lot less than unsecured line of credit rates.

EricL

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Re: $35k (Maybe) Loan
« Reply #7 on: July 05, 2019, 12:42:30 PM »
If it is "no problem" to pay off the principal + interest, why not just save up then and buy the luxuries with cash instead of debt?

If it's to purchase stocks, why not borrow against your existing investments using margin? Margin rates are a lot less than unsecured line of credit rates.

Thanks!  That's an angle I hadn't thought of.  I've typically avoid margin investing like the plague.  The horror stories are epic.  But definitely worth consideration on the smaller scale. 

Thanks to all for the collective face punches.  Just because I'm FIRE'd doesn't actually mean I'm as smart I'd like to believe.  Worry and cynicism aren't necessarily the same thing as wisdom.

WalkaboutStache

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Re: $35k (Maybe) Loan
« Reply #8 on: July 08, 2019, 09:24:11 PM »
Thank you for your input!  It's kind of sad that so many people read this without giving a reply either way.  I can understand not having time for a thoughtful response FOR taking such a loan.  I can't understand why it isn't worthy of a quick face punch reply against.

[facepunch] Punch! [/facepunch]

Having said that, there is one (and only one) instance where you should take such a loan.  If you have debt with an interest rate that is higher than the loan in question, then it would be worth doing it.  My bank made me a crazy offer a couple of years ago, probably thinking I was a consumer sucka and would not be able to keep paying on schedule so that they could slap me with a painful rate later.  Didn't work for them, and I paid off a mortgage that had a high interest rate and saved a lot of money and worry that way.  Even with the transaction costs (which were low), I still made out like a bandit.  If they are crazy enough to offer me virtually free money again in the future, I'll take it again but I think they may have learned their lesson.

It doesn't look like that applies to you (4.99 is vastly higher than what I paid), so cool your jets.

 

EricL

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Re: $35k (Maybe) Loan
« Reply #9 on: July 09, 2019, 10:16:03 AM »
Thank you for your input!  It's kind of sad that so many people read this without giving a reply either way.  I can understand not having time for a thoughtful response FOR taking such a loan.  I can't understand why it isn't worthy of a quick face punch reply against.

[facepunch] Punch! [/facepunch]

Having said that, there is one (and only one) instance where you should take such a loan.  If you have debt with an interest rate that is higher than the loan in question, then it would be worth doing it.  My bank made me a crazy offer a couple of years ago, probably thinking I was a consumer sucka and would not be able to keep paying on schedule so that they could slap me with a painful rate later.  Didn't work for them, and I paid off a mortgage that had a high interest rate and saved a lot of money and worry that way.  Even with the transaction costs (which were low), I still made out like a bandit.  If they are crazy enough to offer me virtually free money again in the future, I'll take it again but I think they may have learned their lesson.

It doesn't look like that applies to you (4.99 is vastly higher than what I paid), so cool your jets.

Alas, I have no debt to justify taking this loan. 

SwordGuy

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Re: $35k (Maybe) Loan
« Reply #10 on: July 09, 2019, 10:02:48 PM »
stay away from margin investing.  please.   it's a great way to turn a really bad market day into a "now I'm broke" market day after.

Rosy

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Re: $35k (Maybe) Loan
« Reply #11 on: August 02, 2019, 08:09:22 PM »
You have too much free time on your hands - so you are beginning to play what-if games, even with scenarios that you already know will have a poor or even devastating outcome.
'cause, well maybe, just maybe, your're smarter and found a way to make it work despite the odds:).

Yeah, I do that sometimes, but having a partner who is more level headed than I (and totally unimaginative about all the cool things that surely would happen if only - I - did them:) - he has a way of cutting through the BS that makes me see the light without being wounded or offended.

I don't, so I'll just say it - foggedd about it:) your first inclination and gut feeling was totally right.

Chris Pascale

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Re: $35k (Maybe) Loan
« Reply #12 on: August 02, 2019, 08:19:12 PM »
I get these offers, too, and just like with the checks attached to other cards or accounts with 0% promo fees, I have to just toss them.

Dicey

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Re: $35k (Maybe) Loan
« Reply #13 on: August 03, 2019, 06:51:16 AM »

Thank you for your input!  It's kind of sad that so many people read this without giving a reply either way.  I can understand not having time for a thoughtful response FOR taking such a loan.  I can't understand why it isn't worthy of a quick face punch reply against.

Haha, so you are looking for more face punches?  ;)

I thought you'd get more too, but sometimes I see threads running for pages over a topic I think is really ridiculous and other times, not much is said about something I think is worth more. Shrugs/  Just the way things work I guess.
Sometimes people don't respond because someone (like happy) has already said all there is to say :-)

I get these offers, too, and just like with the checks attached to other cards or accounts with 0% promo fees, I have to just toss shred them.
FTFY

Wintergreen78

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Re: $35k (Maybe) Loan
« Reply #14 on: August 03, 2019, 10:59:31 AM »
Hereís how iíd decide something like that: what is the difference on that interest rate and your zero risk rate? For me, I have access to an account that returns 4%, so I wouldnít borrow at 5%.

If the offer was at 3%, I might consider it. Then I would realize that a 1% spread on $35k is $350 dollars a year, which is not worth the hassle.

2Birds1Stone

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Re: $35k (Maybe) Loan
« Reply #15 on: August 03, 2019, 11:04:16 AM »
You get hacked, d00d?

Rdy2Fire

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Re: $35k (Maybe) Loan
« Reply #16 on: August 03, 2019, 12:43:26 PM »
NEVER!! Unless of course you had a 'guaranteed' return of greater then 5% which is very unlikely

At one point I thought about taking 100K Home Equity Loan at 3.8% because I was doing better then that investment, return, wise. Based on my salary at the time, life, etc this would have been pretty easy for me to do and in all honesty I'd have made a good amount. However there was still the risk side to think about so I decided against it.

Seadog

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Re: $35k (Maybe) Loan
« Reply #17 on: August 03, 2019, 09:46:20 PM »
Another vote for no.

Banks are blood brothers to insurance companies, and cousins to payday loan companies. Insurance, statistically speaking in purely financial terms is a horrible deal. Their *entire* market, is capitalizing on people with short term (real in the case of banks, potential in the case of insurance) cash flow issues, which can be resolved by long term probabilistic payments.

I won't be so obtuse to say it's a purely win-lose, but the banks largely make money by lending money, collecting interest, and people using that loaned money for largly intangible things like "pride of ownership" in the case of homes, or in the case of margin, by lending it out at higher rates than could reasonably be expected in the markets. They're not right all the time, but more often than not on a dollar averaged basis.

You don't seem to have any cash flow issues, and are generally financially set. You're probably way better off than their average mark, so in a sense it's like a bank trying to lend money to another bank. But asking you to pay retail rates. WHy would anyone go for that? See if you can get something below the prime rate. Then if not, ask them how you can be assured it would be profitable to you to take their borrowed money at so high a rate above wholesale, and when they have no answers ask them why they're wasting your time. If you want to. I mean the simple fact that they're targeting you means they assume you want/need the short term cash to buy short term giddy feels in exchange for a long term negative cost.   

TartanTallulah

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Re: $35k (Maybe) Loan
« Reply #18 on: August 04, 2019, 12:57:17 AM »

Thank you for your input!  It's kind of sad that so many people read this without giving a reply either way.  I can understand not having time for a thoughtful response FOR taking such a loan.  I can't understand why it isn't worthy of a quick face punch reply against.

Haha, so you are looking for more face punches?  ;)

I thought you'd get more too, but sometimes I see threads running for pages over a topic I think is really ridiculous and other times, not much is said about something I think is worth more. Shrugs/  Just the way things work I guess.
Sometimes people don't respond because someone (like happy) has already said all there is to say :-)


I confess to having scratched my head and thought, "Am I missing some clever twist that's obvious to everyone else? Why would you take out a loan with interest if you don't need it?"

EricL

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Re: $35k (Maybe) Loan
« Reply #19 on: August 04, 2019, 07:50:27 PM »

Thank you for your input!  It's kind of sad that so many people read this without giving a reply either way.  I can understand not having time for a thoughtful response FOR taking such a loan.  I can't understand why it isn't worthy of a quick face punch reply against.

Haha, so you are looking for more face punches?  ;)

I thought you'd get more too, but sometimes I see threads running for pages over a topic I think is really ridiculous and other times, not much is said about something I think is worth more. Shrugs/  Just the way things work I guess.
Sometimes people don't respond because someone (like happy) has already said all there is to say :-)


I confess to having scratched my head and thought, "Am I missing some clever twist that's obvious to everyone else? Why would you take out a loan with interest if you don't need it?"

That was my thought exactly.  But I was wondering if my irresponsible impulse had more going for it than I initially believed.  Based on the responses it didnít.  And I did ultimately shred the application.

Dicey

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Re: $35k (Maybe) Loan
« Reply #20 on: August 11, 2019, 12:49:04 PM »

Thank you for your input!  It's kind of sad that so many people read this without giving a reply either way.  I can understand not having time for a thoughtful response FOR taking such a loan.  I can't understand why it isn't worthy of a quick face punch reply against.

Haha, so you are looking for more face punches?  ;)

I thought you'd get more too, but sometimes I see threads running for pages over a topic I think is really ridiculous and other times, not much is said about something I think is worth more. Shrugs/  Just the way things work I guess.
Sometimes people don't respond because someone (like happy) has already said all there is to say :-)


I confess to having scratched my head and thought, "Am I missing some clever twist that's obvious to everyone else? Why would you take out a loan with interest if you don't need it?"

That was my thought exactly.  But I was wondering if my irresponsible impulse had more going for it than I initially believed.  Based on the responses it didnít.  And I did ultimately shred the application.
Smart decision.

MasterStache

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Re: $35k (Maybe) Loan
« Reply #21 on: August 15, 2019, 05:35:28 AM »
I think it would be more useful to use those offers as kindling for an evening fire with a gooey blender drink in hand enjoying the fruits of your hard work. 
« Last Edit: August 15, 2019, 08:36:54 AM by MasterStache »