July 6, 2021
6 min read
Opinions expressed Entrepreneur the members are their own.
More often than not, loans perceived negatively. Mention of debt often accompanied by horror stories of bankruptcy and other theaters of financial disaster. Therefore, it is not surprising that people tend to view loans as a last resort to pay for emergency expenses. But is such a bad reputation justified? After all, if a loan can save a dying man businessand, in turn, help generate profits – a tricky and often irreplaceable move. Of course, there are times when borrowers are faced with inability to repay the loan, but as long as commitments and forecasts are carefully planned, good debt can be a lifesaver and can be used additionally to organize investments.
When you “borrow” debt to maximize your return on investment, you are, in short, borrowing at a lower rate to provide a return at a higher rate. While there is a risk of losing capital, the use of debt for profit is often underestimated. Money… Once you analyze your risk appetite and possibly change your preconceived notions about loans, you can turn debt into a profitable investment vehicle.
Five relatively safe ideas to start with:
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1. Flip the house
A tactic commonly used when buying and selling homes, coup d’etat can also be performed with rented apartments. The idea is simple: find apartments at below market prices, renovate and sublet at a higher rate, and the difference between the rent and the sublease price will become a profit. If you have found the perfect apartment, but you need urgent funds to close the deal, it makes sense to get a loan.
You can of course apply to get one from a retail banking institution, but the process can be tedious and time consuming. A faster alternative could be a home improvement loan from an online lender. With these funds, you can do everything from renovating an entire room to repurposing an existing unused space or an extra bedroom in your apartment (and then subletting it) to converting your garage into a rented music studio or collaboration space. You can also use the quick loan to buy furniture and other essentials that may be eligible for a time-limited discount. The goal is to profit from the sublease earlier, which will offset the interest paid on the loan.
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2. Invest in precious metals
Prices for commodities such as gold and silver usually fluctuate depending on the saving, and are often directly proportional to it. For example, in mid-2020, gold prices hit an all-time high due to economic uncertainty, although stock markets were crashing. This is partly why gold and silver are considered safe investments. The trick, unsurprisingly, is to buy on a downturn and sell on a rise. Based on past evidence, recovery from a downturn usually takes only a few months, and those who regularly invest in precious metals for profit can quickly predict changes with a good level of accuracy.
Given the inherent time sensitivity of this investment, you should have the money ready to deploy. In this case, depending on what kind of profit you expect, it would be a good idea to get a quick loan (preferably on the same day) and take the opportunity. Delay can be costly, eating up profits and negating the entire purpose of the loan.
3. Buy cryptocurrency
Bitcoin, Binance, Ethereum, Dogecoin and many other cryptocurrencies compete for investor attention and money, offering sometimes dizzying (albeit completely unpredictable) profit margins on a trade. Again, the principle remains the same: buy low and sell high. If you have invested well in the stock market, predicted how geopolitical events will affect the economy, or simply spot trends, you can apply the relevant skills to trade cryptocurrency efficiently.
This is also a time sensitive issue, and the slightest delays lead to a significant drop in profits. Thus, a timely loan can improve the bank balance as well as some other current investments. However, retail banks may not be a suitable channel for obtaining loans for this purpose due to the urgency of the investment and the inherent caution with which they analyze it. But a reliable lender who can process short-term loans quickly can be the difference between a huge profit or a bad deal.
As with cryptocurrency trading, you can also invest leveraged funds in Forex trading or stock trading.
4. Grow your company
If you’re a small business owner, you know this all too well: to make money, you need to invest in a business. To grow on a large scale, attract more customers, and sell more products or services, your company may need a quick and timely cash boost. This injection can be used to hire more talented employees, change brand identity, go digital, expand office space, or double down on marketing efforts.
Most of these actions are short-term, as they will yield results fairly quickly. Such short-term actions with limited impact may benefit small business loans from traditional banking or finance institutions, government agencies that promote small businesses or legitimate online lenders. A suitable percentage increase in sales or employee productivity can pay off in months, making the loan a profitable venture.
5. Learn the skill
One of the most undervalued investments is professional development. The job market is unstable and the requirements are constantly changing. To stay relevant, you need to broaden your skill set. Getting a loan to learn a new skill may not seem attractive at first, but doing so can open up opportunities for a higher paying job or promotion in an existing one – a relatively quick and stable return on investment.
The key is to learn skills that are really fun. When you really enjoy doing something, you are more likely to be successful at it, and then you start to monetize it. While computer programming can be a lucrative career choice, if you don’t like it, you will be miserable, which will affect productivity in the process.
You can also use this trick to start a side project – freelance projects, such as selling art or handicrafts from home. For example, you can learn to crochet or plan, and then make unique and cost-effective pieces in your spare time.
In all of these scenarios, carefully study all the terms and conditions of the loan, borrow only from a reliable source, have realistic expectations when it comes to profits, and plan for the worst-case scenario; even if you cannot make a profit, you can still pay off the loan.