Ian and Jacob discuss the risks of borrowing to invest and the fact that the loan must be paid back, regardless of the value of the investment. For Ian this is an acceptable risk and he is committed to changing his lifestyle to achieve his retirement goal.
Ian sells a few of his vintage cars and uses this money to pay off his credit card and personal loan debt. He is now in the situation where he can take the $2,500 monthly sum he was using to pay those loans, and direct it towards an investment loan.
Over 10 years, assuming an annual rate of return of 6%, Ian would have paid out a total of $250,000 in principal and $50,184 in interest (total $300,184).
His total investment savings is planned to be worth $447,711 (difference of +$147,527), putting him much closer to retirement.
- Value of $250,000 investment after 10 years is $447,711
- $50,184 Interest paid
- $250,000 Loan amount
- $147,527 Net gain