2 and half years ago I took a personal loan at 5.9% to invest it in the stock market and corporate bonds averaging at 7.5%.
It was mid 2023 so the stock market already paid all the future owned interests ! Good deal !
Anyways, i’m about to become a home owner (sorry boys I bought my primary home to avoid paying rent and not for yield (I couldn’t accept my pension fund working at 2%)) and I heard home owners can have lower interets as low at 3.9%, maybe I could grab 4.9% - I discussed that with a french friend and he told me : “why don’t you take a loan in a french bank ? You could grab a 3% in €”
Let’s avoid speculating about currency and hedging risks 3% is a bargain ! No way you can have that in Switzerland… can I ? Or maybe should I go to germany ? Italy ? Can a swiss citizen grab a personal loan in a country he does not have a revenue in, doesn’t live in etc… ?
Anyone as experience with this topic ?
Or maybe private loans are bettter, person to person ?
Thank you in advance,
Regards
A personal loan for investments sounds like a terrible idea. It may have worked out for you this time but I would strongly discourage this as it’s high risk with very little reward. I’m happy that such speculation will soon no longer be subsidized with taxes.
If you want to leverage your investments, I’d simply use a margin loan at IBKR. That’s assuming your mortgage is already at the maximum. In CHF you currently pay only 1.5% p.a. and it gets even lower for large amounts.
You should make sure to keep your leverage low enough to not risk liquidation in a market crash, though. And better be sure about your risk tolerance.
@rolandinho You mean the interest to pay for a loan in CHF, for a property in CH, for the home loan/mortgage?
No, no, i’m still talking about personal (consumption) loans. Turns out when you fill the form for personal loans they will ask you if you are an home owner. If yes, you can get 1-2% cheaper loans.
@PhilMongoose
I think OP means that sometimes you can get an unsecured loan at a better rate as you have potentially assets to go after.
I don’t get this consumer debt to invest…there are debt tools intended to this use case if you really want that…
I finished my studies recently, I have an average to high income but very small wealth.
In that case you can easily get a big consumption loan with no guarantee but the amount I could get in lombard credit is not significative (I still plan to use it to pay the remaining amount tough…)
Indeed it might not be easy but this is factually incorrect. My IBKR portfolio is much lower as 100k and I can get roughly 30% of it in margin loan. Depends on what you are invested in (I’m largely IUSC and VEVE)
Your guidance if a loan makes sense for investing should be risk free rate + a spread.
Risk free rate for CHF is currently 0% (SNB short term rate).
You definitely got very lucky with your 6% loan. That‘s just about the average expectation of stock returns in CHF. You had luck, that we got a bull market.
Generally I would never take a loan for more than about risk free rate + ~2%. That would be a loan of 2% right now.
And after we will lose the tax deductibility, due to the imputed rental value law, I would lower that even further. IB‘s rfr + 1.5% is just about the maximum I would pay.
I base this on literature saying you should stay as close to risk free rate as possible.
The 3% in € can be interesting, but I actually doubt you can get that low of an interest.
Rfr is 2% in € currently.
That‘s only for portfolio margin. Normal reg-t margin you can get at any value, as ling as you qualify for the other required metrics.
The question tough was not if I should do it or not, I did it, i’m happy that I did it, it’s the only lever left for young skilled people who do not come from a wealthy family. Nobody is hiring us at decent pay, homes are not affordable anymore and for our “well being” people want to prohibit consumption loans…
I’ll do it again as soon as I have the chance. And people who worked 2 years at 100% should do it too ! As soon as the market gaps. Keep it mind that you only pay the interst on the remaining amount of the debt but all the capital keeps working. So two years in you only pay 5.9% on the 70% of the amount but 100% of the capital brings you 7%. We’ll discuss risk free rates further when I’ll have a patrimony worth protecting - for now I have to take some risk and we’re now where near the x5 x10 x20 leverage some traders use as my debt/equity ratio is lower than 1…
Anyways the question was : where can I get better interest rates ? If one of you want to use his margin at 1.5% and lend it to me at 3% let’s do it !
I can sell my assets to repay my loan but I don’t have enoguh margin to
Good luck with your endeavor. Just as suggestion: Avoid pitching this to your friends in similar situation. If it blows up, they’ll blame you.
If you feel fine going into debt (with high interest) for some more stock gains, go for it. But to 90% of people in your situation I wouldnt advise that (and no, I’m not a rich person that doesnt want them to become rich).
(and no, I’m not a rich person that doesnt want them to become rich).
Sorry sometimes it does sound like it. I would understand any similar advise for people doing leasings and such… but I feel like personal loans are a great tool ! You know how much you are going to pay, they are fixed interest and they allow you to unlock liquidities witouth any guarantee but your income.
In a real life example I know people that have tens of thousands of credit card debts. One of my friends had 3 of them, I made her cut 2 of them, keep the one with the lower interest fee and lower maximal amount, made her pay the debt with consumption credit (she got 4.9%) and checked on her so she does not exagerate with credit cards again. According to my predictions she saved ~1’500 CHF over 2 years just by restructuring the debt.
Yes, wise people like you would say that it’s better not to have credit card debt. But reality is different.
I would say it’s a tool, a great one in my perspective, but it comes with pro’s and cons which is important to be aware of…
Still that’s not a tool for your average swiss, better not to advertise it, you are right.
What you describe here is not what you plan to do (consumer credit for stock gains).
This is debt management and makes sense. Nice that you could help your friend save money with it. Very much different from pitching going into debt for profit to friends.
What you describe here is not what you plan to do (consumer credit for stock gains).
This is debt management and makes sense. Nice that you could help your friend save money with it. Very much different from pitching going into debt for profit to friends.
Well in such case I only have my personal example
But i bet most of you do, or have experience with margin trading right ? I don’t see much difference between both debts except the interest rate … both are “overcollateralised”, one is based on wealth and the other one is income … and that’s it ?
@oslasho were not talking about x10 lever so… i’ll go broke with ladies first
Have you already thought of using leveraged ETFs, i think the risk is smaller and the return profile coule be pretty the same… depending on your asset allocation preference
I would say this much: While getting a loan to buy assets is risky (that applies to mortgages too, btw), it is decidedly better than the typical consumer loan use case (use the loan to buy consumer goods). Even in the case of a major crash, you will have assets to repay at least part of the loan.
Market gains - like salaries, pensions, and bank account balances - are never completely guaranteed. The ratio of potential risk to potential return is not amazing, and using that kind of leverage is not something I would generally advise. But everyone has to determine their own risk tolerance and capacity.
To answer OPs question, the best available published rates are currently 4.5%, as shown here.
Owning a house in Switzerland makes a more likely that you will get the lowest available rate, but your income, expenses, debt, etc. will also be taken into account. Showing that you have other wealth (i.e. the assets you bought with the loan) can also be beneficial.
P2P lending platforms are your best option if you want to get a rate lower than what’s offered by lending institutions. AFAIK there are some foreign P2P loan platforms that accept customers in Switzerland. It isn’t likely you will get a personal loan from a foreign bank or other conventional lender, simply because it’s more complicated for them to obtain Swiss creditworthiness information or to seize assets that are in a different country.
If you are able to get a private loan (e.g. a family member is willing to lend you the money), that could be an even cheaper option, depending on what the lender charges for it.
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