Ali and Saira, with a full awareness of the potential risks of investment lending, move forward with Laila’s recommendation and collectively borrow $300,000.
The total monthly loan payment for the couple is $1,778, which is within their budgeted $2,000 monthly savings amount.
After 20 years, with an assumed annual rate of return of 6%, Ali and Saira would have:
- Grown their initial investment to a value of $962,140 after 20 years.
- Paid $126,878 in interest, which may be deductible1.
- Generated a net gain of $535,262.
This solution will help them meet their goals of leaving a sizeable inheritance and saving for their retirement.
Without the investment loan, Ali's monthly PAC contributions of $1,778 over 20 years with an assumed rate of return of 6%, would only be worth $825,925.