Investing with Credit Card Loans

Occasionally, a hot investment opportunity or situation appears when you are not very liquid in capital to take advantage of it. If you only had the funds, you would get in this sure thing, but where can you get a short term loan to do so? A personal loan from your bank is definitely out of the question because of the high interest charges. Here is one way, albeit a bit gutsy.

First of all, as a fair warning, do not attempt this strategy unless you fully understand the risks, can afford to take a financial hit should your investment opportunity goes south and that you are able to make a minimum monthly debt repayment from current income.

If you are fortunate enough to have low debts, good credit ratings and have credit cards with a generous credit line, you probably have received more than one offer in the mail from these credit card companies with blank checks attached. The offers range from 0% interest for 12 to 18 months or 3.99 - 4.99% for the life of the loan.

Try to get that kind of interest rate for a personal loan from your local bank; you’ll be lucky to get less than 15% plus having to provide collateral in some cases.

Depending on the credit card company, the offers will differ on terms and loan fees. Read the fine print to make sure you are getting the best deal on the loan and understand the fees.

In most cases, writing yourself a check from the credit card company carries either a transaction fee that is a percentage of the loan amount or a minimum charge per check you write. Normally, the percentage is no more than 3% for the total amount of the loan. Can you see how this can be a source of low interest funds for your investment? The cash is practically free.

Here is an example of how this will work with an offer I have taken. I write myself a check for $10,000 using the 0% interest for 18 months and it costs me $300. Now, all I have to do is get into an investment that makes more than 3% within this time frame and I am in profit. Sure, I can stick that 10K in a CD and make a couple of percentage points, but that would not even be worth the trouble. I am looking to put the money in investments with the potential for higher returns in the double digit range.

Remember, this is for the short term until you become liquid from other investments to pay back the loan before the expiration of the credit card term. In the 0% scenario, the interest will revert to what ever the current interest rate is when the 18 months is up. If the 3.99% route was taken and I have not paid back the loan, my investment will need to perform better than 3.99% per year to be in profit. I will also have to take into consideration the minimum monthly payment to keep up the loan.

In the past, with a well chosen investment, this strategy had worked for me in achieving a profit minus the paid interests and fee for the money I had borrowed. There was never a guarantee of success; however, it was a calculated risk. One in which I knew I would eventually have had the funds available from other assets to cover the debt should the investment not pan out.

All that was done was to buy some time and invested with money that I did not have available at the moment. Nothing beats making money with “other people’s money”, -in this case the credit card company’s.

Note: While this strategy has worked for the author, it is not a guarantee that it will work for others and is highly dependent on the performance of the investment. This is not recommended for the inexperienced investor or those that currently have large debts. Building wealth starts with paying off outstanding debts and a good place to get support from a community of people with the same goals in mind is at debtconsolidationcare.com.