Is It Good To Take Personal Loan For Share Trading?

A Personal Loan For Share Trading

A personal loan for share trading can be seen as a short-term financial solution for an individual especially in matters that require instant cash such as purchasing of a new house, going back to school, going on a holiday or making a deposit. it is the best option that one can go for, which does not encourage borrowing from family and friends during financially trying times.

personal loan for share trading can also be a good idea, but it has its merits and demerits. However, it is important to note that if the investment proposal is low risk but has high returns, the individual can go ahead and take a personal loan. On the other hand, such an approach may not be advisable when employed in projects that have high investment risks.

Investment in this case suggests that stock market for example , which is regarded as one of the investment form that has the high potential of gain, many people ask if it is sound to take a personal loan and invest in shares. That answer is basically dependent on how familiar and how comfortable someone is in the market. More importantly seasoned investors know their risks and strategies and hence taking a personal loan even to the extent of investing in high risk areas such as the stock market may lead to profits. But for novices, it may be bad to borrow money to buy stocks because it can be quite an aggressive market and not investing strategy that could come back to hurt them long term.

However, before making the decision to use a personal loan for the purposes of investing, it is important to consider the merits and demerits thoroughly. The benefit is that a personal loan allows for swift availability of funds without the need for any form of security, which may allow you to take advantage of many investment opportunities. The drawback however is the obligation to pay back the loan, irrespective of the returns on investment. Where the investment runs at a loss or does not achieve the projected profits, you shall still have to pay the loans repayment on a monthly basis, which places financial burden on you.

Personal loans are a type of financing that can provide assistance for a wide range of requirements whether already planned or unforeseen. This begs the question for many, “Would I be able to get a personal loan to invest in stock?” So keep reading to find out everything you need to know about using a personal loan to do something almost everyone does – invest in the stock market.

1. Fund Usage is Not Restricted

To provide an example, there are few products in the market like personal loans where one does not have to stick to a defined purpose of the borrowed amount. As already mentioned availing of a loan does not mean that one is going to be monitored on how they will use that money. One might decide to invest the amount into the stock market or any other for that matter based on personal needs and financial targets.

2. Leeway for Making Investments

Personal loans can be taken for investing in a number of things which also includes the buying and selling of shares. This option is convenient for most people who want to invest but do not have cash or savings at the moment. Since there are no lines on the use of the loan, the borrower can dish out a set amount for investments concerning his or her needs and strategies in the market.

3. Debt to be Paid Back

No matter how your ventures in the stock market turn on, you shall still be expected to pay back the loan within the set time frame. Payments in the form of monthly installments have to be made as per the stipulated conditions irrespective of how the investment performs. This suggests that, in spite of all odds, stock investments costing you more than you earn, the loan still has to be paid which may cause social economic challenges if the stocks don’t do well.

For these reasons, even if taking a personal loan to buy stocks may raise your financial leverage, it is necessary to weigh the demerits involved especially when it comes to paying back the money borrowed. Be sure that both the payments and the losses in investment, if any, are within your coping range.

Features Of Personal Loan For Share Trading

The following points outline the various features and advantages of HDFC Bank’s loan for trading businesses:

1. Tenures, Processing and Disbursement Of Loans Is Easy And Flexible

HDFC Bank provides flexible loan periods of between 12 to 48 months. This enables the traders to pick a repayment schedule that is more convenient to their financial health and objectives of their business. The process of application is non-complex and capable of being commenced on the internet which is a form of application for those who love online transaction. On the other hand, you can go to the nearest HDFC Bank branch and fill the application form there.

2. Loans Without Collaterals

One of the crowning merits of HDFC Bank’s loan for trading is that it is unsecured. This is a plus for traders since most of them may be unable to provide collateral or securities to facilitate the loan. As such, any business can fulfill any immediate cash needs without the need to offer any land or other property for mortgage, hence making the loan even more appealing to many kinds of traders.

3. Simple Option To Move Balances

HDFC Bank has availed this facility of easy balance transfer for existing business loan for individuals availing it from other lenders. HDFC Bank encourages customers to transfer their remaining balance on existing loans to the bank in order to get better deals, lower loan interest rates, and affordable EMI’s. In turn, this helps in making the entire loan cheaper and lightens the financial stress.

4.  Dropline Overdraft Facility for Extra Funds

Another valuable feature of HDFC Bank’s loan for trading is the dropline overdraft facility. This unsecured facility allows you to access additional funds through a separate current account. The advantage of this facility is that you only pay interest on the amount you utilize, as opposed to paying interest on the entire sanctioned limit, making it more economical in terms of effective management of business expenditures which are on the rise and falling trends.

5.  Loan Amount

With HDFC Bank’s MSME trading loan, you can avail of a significant loan amount of up to ₹40 lakh. In certain locations, this amount can increase to ₹50 lakh. This high loan amount is suitable for fulfilling a number of larger financial needs for your trading business be it for working capital, enlarging the scope of operations or to bridge any short-term liquidity gaps. Conclusion HDFC Bank’s loan for traders and trading businesses comes with features such as flexible repayment tenure, easy application process, no collateral against the loan, introduction of such products as balance transfers and overdrafts etc. This makes it one of the most recommended options for any trader who wishes to quickly and affordably finance any of their business ventures.

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Benefits of Investing with a Personal Loan

Advantages of personal loan for share trading

1. Access Deeper Pockets

One of the prominent advantages that comes with taking a loan for purposes of investment is the access to a large amount of money. One can easily borrow amounts as high as ₹5 lakhs or more, as long as they meet the eligibility criteria. With the advent of internet applications and minimal hassle over paper work, investment personal loans are availed with high speed. The amount can also be deposited in a bank account that is also serve as security and linked to a demat account.

2. No Restrictions on the End-Use of when the Loan is Paid Out

Any such personal loans for the investment purposes bear no restrictions about the end use of the amount offered which means that there is no need to apply separately for the loan for the investment purposes only. Thus you are allowed to invest the money and also managed to keep some portions of the money for your daily spending. Such is a peculiar instrument offered for the administration of such investments for which time frame varies from one month to several years.

3. No Risk Embraced while Seeking these Funds

It is common that personal loans for investments are unguaranteed, and thus one does not have to use any of his or her properties as guarantee. This minimizes the chances of losing any asset in case one fails to pay back the loan. For this reason, the risk component is fairly low for the unsecured loans than for the secured loans hence it is a fascinating option for several investors.

4. Repay with great ease

In case the investment yields significant return, the borrowed amount can be settled off by utilizing the investment itself. This makes it possible to settle the housing loan taken against such investment and alleviate the financial obligation of the investor. Besides when roi is high, you can also earn an extra income that can facilitate easier repayment of the borrowed loan.

Dangers Associated With Personal Loan For Share Trading

Market Risk

Engaging in activities such as purchasing stocks or other assets of similar nature to the gamble exposes one to certain risks. The stock market is prone to ups and downs, and as such, investors stand to lose their money. Failing to earn profits due to a bad run in the market means that you do not only stand to lose the money you put in, but you also will have to service the loan as well. That may lead to a cycle of debt, stretching the limits of your finances and inducing pressure in managing finances.

Expensive Interest Rates

Most personal loans are non secured loans and that is the reason they tend to have high rates of interest when compared to secured loans. This means that the borrowing cost is likely to be high after some time. In the event that you are not able to pay the monthly installments with ease, there is no point in borrowing money for investment reasons. Ensure that the repayment of relevant loans will not put any strain on your current financial situation.

Length of Investment

Time constraint plays a key role when it comes to the investment success. In investment activities via the stock market, the longer the duration of the stock holding period, the greater the chances of dividend accrual. Nevertheless, within this time, you will be obliged to pay salary for the loan you borrowed including the loan EMIs. On the other hand, should the investments record less than good returns, you could find yourself in a situation where the amounts you have paid as installments exceed your profit from the investments creating a loss.

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