Borrowing against Savings

[DeepInYourMind]

Let's say you have an x amount of cash stashed somewhere.

What are the best options of borrowing money against those savings, rather than spending it directly.

Or maybe convert it into another form of security you can borrow against?

 

[It's Me Scumbag]

Life insurance policies have worked for me before...

 

[Aviator]

Let's say you have an x amount of cash stashed somewhere.

What are the best options of borrowing money against those savings, rather than spending it directly.

Or maybe convert it into another form of security you can borrow against?

Why would you borrow when you have?
It is obvious interest on borrowed amount will be higher than interest received on savings. So you'll generally be losing out.
Or am I missing something?

 

[Okiya]

Why would you borrow when you have?

Cashflow/ liquidity

 

[Aviator]

Cashflow/ liquidity

Why not just withdraw the savings?

 

[It's Me Scumbag]

Why not just withdraw the savings?

And lose out on the savings and their intrests?

 

[Okiya]

Why not just withdraw the savings?

Assume his savings earn him 7% and he is borrowing at 12%, it means he is losing 5%.

If he decides to use his savings instead it means he is saving 5%.

If he loses all his savings in the business he puts the money into, it means he will have to go back to the bank and borrow. However, he will be losing 12%.

 

[Luther12]

Why would you borrow when you have?
It is obvious interest on borrowed amount will be higher than interest received on savings. So you'll generally be losing out.
Or am I missing something?

SACCO?

 

[Aviator]

SACCO?

Borrowing from your Sacco (when savings equal or exceed the borrowed amount) is akin to keeping money in one pocket and paying someone to transfer it to your other pocket.

 

[Aviator]

Assume his savings earn him 7% and he is borrowing at 12%, it means he is losing 5%.

If he decides to use his savings instead it means he is saving 5%.

If he loses all his savings in the business he puts the money into, it means he will have to go back to the bank and borrow. However, he will be losing 12%.

Let's work with figures. Assume he's saved 1m and he's borrowing 1m.
So, from the Sacco, he will get 70K interest and pay them 120k, thereby giving a net of negative 50k into his pocket.

If he withdraws the savings, he owes nobody nothing, therefore a net of zero into his pocket.

If the business goes bad, and this can happen in either case, then he can always borrow afresh and add another loss of 120k, either case.

 

[DeepInYourMind]

Life insurance policies have worked for me before...

Hmm.. Let me look into this

 

[DeepInYourMind]

Why would you borrow when you have?
It is obvious interest on borrowed amount will be higher than interest received on savings. So you'll generally be losing out.
Or am I missing something?

As @Okiya mentioned, liquidity is my concern. In absolute terms I'll be losing out, but willing to pay the price for a piece of mind but will look good on my credit rating

 

[DeepInYourMind]

SACCO?

Unfortunately I've been avoiding saccos after hearing some horror stories. I think you have to consistently save with them for 6 months or so before accessing credit. Will rethink this but may only help out for future plans

 

[Ubongo]

Borrowing from your Sacco (when savings equal or exceed the borrowed amount) is akin to keeping money in one pocket and paying someone to transfer it to your other pocket.

Niliona hii debate huko County.....maoni yenyu ni gani.
The nigger forgot that these are not life time loans...... after 10 years, washamaliza loan and undertake other investments

 

[It's Me Scumbag]

View attachment 36933
Niliona hii debate huko County.....maoni yenyu ni gani.
The nigger forgot that these are not life time loans...... after 10 years, washamaliza loan and undertake other investments

The folly of taking one man's beliefs as gospel truth...

 

[Aviator]

As @Okiya mentioned, liquidity is my concern. In absolute terms I'll be losing out, but willing to pay the price for a piece of mind but will look good on my credit rating

Then let me ask this foolish question.
What's the end result in saving?

 

[Luther12]

Niliona hii debate huko County.....maoni yenyu ni gani.

Take it as a caution not to over-borrow.

 

[DeepInYourMind]

Then let me ask this foolish question.
What's the end result in saving?

Not a foolish question, but the end result is cushioning for the rainy day

 

[Memes]

you should ask yourself first when you borrow how do you expect to pay back. This loan should either be for emergency purposes or for investment in anticipation of paying back the amount otherwise use your savings.

 

[innwisd]

Borrow only when you have less or none because borrowing attracts interest and if you don't plan to invest what you are borrowing then you will forever remain in debt.