As the name suggests, investment loans are loans people take to invest in various places such as hedge funds, property, stocks, etc. This process is known as borrowing to invest or investment borrowing. According to the video narrator, the key to investment loans is risk and return, basically, low borrowing cost and high investment return.
The narrator goes on to say that there are two ways people can borrow loans with lower interest rates than card or private loans. The first is tapping into their home equity or using their primary home as collateral, and the second is an investment loan program.
After borrowing the money, people can invest the money and enjoy the returns. Below is a sample of investing with loans and the charges it attracts.
For instance, if a person borrows $50,000 to invest in stocks and the value rises, and the person sells the stocks at $75,000, and the loan interest is $5,000, they only need to report a profit of $20,000 on their tax return. Why? Because the profit from the stocks is $25,000 less the $5000 loan interest, the remainder is $20,000 in capital gains.
