Personal Finance

Using a LOC to fund investment

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  • Feb 2nd, 2015 1:09 pm
Jr. Member
Mar 30, 2008
138 posts
21 upvotes
Toronto

Using a LOC to fund investment

Hi everyone,

Quick question regarding using line of credit to fund investments. I got secured TD loc based on my investments with them. I need it for the next few months to pay off some large expenses but after that I will just have it sitting there. The loc is at 4.75% and my investment portfolio has been very steady in the last few years at returning 6% or more. Would it make sense to use the loc to fund investments? I believe there is a tax break on the interest paid on loc and if I invest it in Canadian ETFs then the return from those will also be tax deductible. What do you think?

Background: TFSA is maxed out, nothing in RRSP, no debts.
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5 replies
Deal Addict
User avatar
Oct 4, 2004
4349 posts
1588 upvotes
Vancouver
Past performance is not indicative of future results.

Don't rely on your investments to pay off your LoC. If you think you'll be able to afford paying it back in due time then do it, what choice do you have if these are important expenses? Low interest rates are meant to spur economic activity :)
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Deal Addict
User avatar
Nov 9, 2003
2689 posts
282 upvotes
This is not the time to borrow money to invest, you missed that by about 3 years ago.

Sure you get to write off the interest but right now you'll be playing with fire and can easily get burned. I'm not confident in 6% returns this year
Deal Addict
Feb 2, 2011
1617 posts
270 upvotes
Ottawa
My friend was convinced that borrowing money and invest was a brilliant long term plan. Why not since one of his friends had made a mint from it.

Unfortunately, he borrowed $50k just before the 2008 crash. He still hasn't recovered from it and has paid out thousands in interest so far.
Deal Fanatic
User avatar
Jan 27, 2007
5116 posts
984 upvotes
T.
If you have the cash flow to pay the loc and all other debts without relying on the investments to pay it off go ahead if your time frame permits and you have some financial savvy.
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Sr. Member
Sep 24, 2010
917 posts
65 upvotes
Toronto
the above posts which are recommending against borrowing to invest, I don't fully get them. What's the difference between borrowing on Margin account for investing vs borrowing from a line of credit (other than the interest rate)?

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