Should You Invest in the Stock Market If You Have Loans to Pay?

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Many people are dealing with multiple loans. Most people have student loans, home loans and automobile loans to pay off when they start thinking about investing. It is the norm for adults to start saving for the future and investing in the stock market for quick gains. Nonetheless, when people have multiple loans to pay off, they tend to get a little baffled about their priorities.

Many people overpay their student loans and other loans, while completely ignoring the option of investing for a financially secure future. In fact, a survey reveals that more people are concerned about their monthly loan payments than they are about their retirement plans.

Understand your outstanding loans

When you are dealing with multiple loans, the best way to deal with them is to consolidate them. However, if you get an idea about the average interest of the total pending sum, the task becomes a lot easier. Interest rates can be extremely variable depending on the kind of loan, the tenure of payment and the sources. Having an expert to help you out with the total current interest rate always helps to calculate the amount accurately. Once you have an idea of exactly how much you have to pay each month, you can always judge if you should think about investment.

Find the historical return of the stock market

Thankfully, Australia has one of the best performing stock markets and share price information in the world. Investing in the ASX has a number of advantages including transparent transactions and even law for all investors. That eliminates many of the potential risks from the actual investment process. The current records show that the ASX stocks have returned about 10% at an average per year. Even in 2017, the rate has been around 11% to keep this trend alive. Being a first world country with a sound economy, Australia does not have to deal with inflation or its effects on the stock market.

Should you invest?

Let us say, your outstanding loan interest is about 7%, and the market promises a return of about 11%. As you can see, you can expect a positive return on investment. Even if you have multiple loans that are charging you less than 11% as an interest rate, you can easily think about investing in the share market.

In case you have one loan that is charging more than 11% as an interest rate, then you may think of using the leftover cash to pay more than the minimum instalment on that loan or all the outstanding loans contributing to this high rate. The idea is to pay off the debilitating loan sooner, so you can start your investment in the future.

While juggling multiple loans, thinking about a new investment can be difficult. Especially with bills to pay, the idea of investing can seem more than utopian. However, with the right advice, you can change the way your finances look right now and secure a brighter future for you and your family.

Charles Brown is a freelance writer and blogger. He contributes to various blogs.

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