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What's the best advice you've ever received?
(sh.itjust.works)
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this post was submitted on 27 Apr 2024
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Asklemmy
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Why? Seems to me paying debts early is good advice, less hassle dealing with those loan sharks.
Depends on the point of view. If your biggest risk is you spending that loan money on gambling, then yes paying the debt early would help you get in less trouble.
From an economic point of view, if you don't need that money at the moment, you should invest it, so that you can make a few bucks. If you get 1-2% more on every transaction that way, it really does stack up at the end, since this will make you exponentially more money.
Hmm I've never thought about it that way. Definitely seems like we'd be better off not getting taxed by employers throughout the year, as then it can offset mortgages etc before paying up.
I'm sorry but what money are you talking about here? A loan with no interest?
Tbf I'm really not savvy in loans, but I mean any amount of money X that you have to pay back with Y% of interest in Z days. If you take that loan and you know an investment that will guarantee you (Y+1)% then you should borrow money. (That conclusion is of course completely neglecting risk management)
You are correct in your theory... In practice however there is no such guarantees, if there were, it would be a perpetual money making machine
Investment opportunities that guarantee a return will always guarantee less than the interest of regular loans. So unless you are a billionaire, there is no such luck.
In practice, regular investment like mutual funds average to x in the long run (10 years or so) but you'd never find a 10 year loan that does not require you to pay regularly and with accrued interest for that time, so it defeats the purpose of taking out a loan specifically for investing long term
And that's why interest on borrowed money tends to cost more than any guaranteed investment. Because otherwise the ones loaning would just take the investment themselves.