Investment Loan

There are many ways to finance your investments. You can allocate a portion of your regular income to invest with, you can participate in an employer sponsored retirement or investment program where they match your investment contributions, or you can borrow money for investing. While this final method of financing your investments gives you more money to develop your investment portfolio with, it also creates an added element of risk. If your investment doesn’t pay off, you are then stuck paying off the money that you borrowed to invest, as well as the loan interest and fees.

Why use the Investment Loan Calculator?

The purpose of the Investment Loan Calculator is to illustrate how financing your investments with borrowed money can increase your return potential. To use this financial tool you will need to enter information about your loan terms, as well as information about the investment that you are considering.

The Investment Loan Calculator doesn’t only help to illustrate the potential benefits for a particular investment; it can also help you to determine what loan terms you need to make the transaction profitable. Knowing exactly how much you stand to gain is essential when balancing the risk against the potential rewards associated with investment loans.

How to use the Investment Loan Calculator

Here’s how it works:

  1. Enter the amount you intend to borrow by typing into the box or using the slider next to it
  2. Input the number of years you will repay your loan over
  3. Specify your loan’s interest rate
  4. Enter the value of your initial investment – often this is the same as the loan amount, unless you are splitting your loan across multiple investments or have your own capital to invest alongside the loan
  5. Add your predicted rate of return on your investment – it is recommended you make a cautious estimate to give yourself extra breathing room
  6. Enter the percentage of your profits you intend to reinvest on an annual basis
  7. Click View Report to see information on your loan, investment, and how they interact and affect your net value.

Who is this calculator for?

This calculator is most useful if you:

  • Are looking into the possibility of making an investment with borrowed money
  • Want to measure your investment’s projected rate of return against your monthly payments
  • Would like to calculate the difference in return based on the percentage you reinvest.

How can I predict my annual rate of return?

Firstly, remember that no investment prediction is guaranteed to be correct. The results shown by the Investment Loan Calculator uses rate of return as an average, as in reality this can fluctuate a great deal from year to year. Typically, investments with higher returns come hand in hand with higher risk due to increased volatility.

Despite this, you can look back at the history of the company you are investing in, as well as its competitors. This information, combined with your knowledge of the current economic climate, will enable you to make an educated estimate of what your average rate of return could be over the course of your loan at least. When in doubt, estimate conservatively.