Contradictio

It seems very counterintuïtive but, with inflation at rates like 9 and 10 %, it pays to loan money. Especially now, when interest rates are way below the inflation rates. I will explain myself further.

A loan with a term of 10 years right now, would cost around 3 % interest per year in the US, and about 2 % in the European continent. Inflation rates in these continents are almost similar, just below 10 % right now. And the predictions for inflation in the next year are still way above the 3 % interest rate. This means that getting a loan right now, is in fact making you money. How, you say?

Well imagine, wanting to do something to your house and you need 25000 USD for that, it is better you loan for it now, and get it done as soon as possible. The inflation rate will only make the work more expensive in the future, and will probably cost you 35 to 40k USD in ten years. If you do it now, and loan for it. You will pay with interest over the course of 10 years, 28968 USD. This at an interest rate of 3 %. So, in fact for the same work on your house, you will pay at least 7000 USD less.

This explanation, is very simple of course, but it is a fact. People tend to do the opposite when inflation arises, but that is exactly the moment when investing brings the most profit in the long run. The money you get today, will be worth 9 % less in a years time. So, why would you save it? You are way better of investing it. Any investment is good, as long as it promises to give return in the amount of time you have in mind. My experience tells me, that a horizon of 5 years at least, gives you almost a guarantee to get a profit. When you have a longer horizon, it is even better.

Big guys are doing it

Do you think the Warren Buffets of this world are investing only their own cash? No, of course not, they are loaning money, to invest in into stocks and hedge funds. Because money is extra cheap now on the lending market, adjusted for inflation of course.

Anyway, do you need to do it? Hell no, but sitting on cash, is not going to give you a return either. To the contrary, you will lose money at the highest rate since the eighties.

Invest people, stocks, crypto, funds, anything that brings in yield in the long run!

Sincerely,

Pele23

Posted Using LeoFinance ^Beta