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  • Debt & Negative Equity

    Personal loan - madness or missing something?

    So why can I get a personal loan to spend on depreciating assets? But I can’t get one to invest in appreciating ones? 

    It’s crazy isn’t it. I could spend £10k on a car that would be worth £7k the day after I bought it. But if I stated I wanted to invest the money in shares which have grown on average by>7% per annum. The bank won’t like it.

    What am I missing?
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    That they have grown does not mean they will. What goes up must/may go down.

    Banks are reluctant to lend on speculative assets. Cars have a value, albeit reducing value.

    There have also been cases where banks have had their reputation tarnished for lending money for people to speculate who cannot afford the losses.
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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    Good explanation. Perhaps I’ll buy a classic car and sell it then buy some shares?
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    Yes indeed classic cars are good - or a classic property

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    Jonathan Clarke. http://www.buytoletmk.com

    There are many threads and discussions about what is the best investment

    Houses or shares

    But it all boils down to this

    Mainstream lenders will give me 75K loan on a 100K  house

    They wont give me jack though to buy 100K worth of shares .

    Why

    Shares rely on the individual too much and individuals are far too volatile

    Mortgage Lenders  invest in houses not individuals

    Houses are solid bricks and mortar .

    Shares rely on a flimsy  bit of virtual paper

    You can repossess a house and recover your loan when a person makes a poor decision

    You cant repossess a  piece of paper and recover your loan  when a person makes a poor decision

    You may be good at picking shares but they don`t know that

    You may be good today but bad tomorrow

    But even if you have a melt down that house will still be standing there tomorrow come rain or shine

    Barclays / Nationwide / Nat West / HSBC  have already worked that out and done that DD

    They lend on houses not shares for very valid reasons

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    Jonathan Clarke. http://www.buytoletmk.com


    Yes but my example was a depreciating asset- I get the property argument. I don’t get it for a car.
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    As DL and Stuart said  . A car still has value

    A piece of paper doesn't

    People would loan to you to buy shares if you want but the interest rate would be prohibitive

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    Jonathan Clarke. http://www.buytoletmk.com

    A share in a company has value. It is an asset that creates positive cash flow. I don’t see how a car has any more inherent value?
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    Why couldn’t a bank recover their money by taking ownership of my shares?
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    Ok fair comment they could repossess your share certificate

    But I cant explain much further

    If  Barclays et al thought that by lending you 75K to buy 100K worth of shares they would make money they would

    95% of houses go up in value i estimate

    So even if you overpay today chances are in 20 years it will have doubled in price

    Its just not the same for shares

    Shares rely 95% on you as an individual buying the right shares

    You would need to provide them a personal CV of your expertise

    No newbies allowed . Give them a 20 year track record maybe and they will go into business with you

    With houses its just a house number and postcode and a few bank statements

    No experience needed

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    Jonathan Clarke. http://www.buytoletmk.com

    Sorry JC that's not true. Shares are very similar, in the sense that over a reasonable period of time. The value of shares will go up. You can simply buy an index-tracker and beat inflation over almost every 7 year period. As you know parts of the UK have seen 0 capital gains over the last 10 years... I don't see any major differences.

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