Bor­row­ing money to in­vest is bor­row­ing trou­ble

Daily Local News (West Chester, PA) - - BUSINESS - By Bruce Wil­liams Smart Money

DEAR BRUCE: >> My bank just gave me a $5,000 credit card line. I have never used a credit card be­fore. I am se­ri­ously think­ing about us­ing the card to in­vest.

What do you think I should in­vest in? A small busi­ness, the stock mar­ket, own­ing land, or do you have any sugges­tions? I do not want to make a bad in­vest­ment. I also do not have any in­vest­ment ex­pe­ri­ence. -- Reader

DEAR READER: >> Us­ing a credit card is no prob­lem as long as you make your pay­ments on a monthly ba­sis and avoid in­cur­ring se­ri­ous in­ter­est. The idea of bor­row­ing money, which is what you’re talk­ing about do­ing, at a sub­stan­tial rate of in­ter­est and in­vest­ing in the mar­ket, which you know lit­tle or noth­ing about, sounds like a ter­rific recipe for dis­as­ter.

The idea of in­vest­ing money in the mar­ket, how­ever, is a good one. You should start read­ing your lo­cal news­pa­per and mag­a­zines that are geared to­ward in­vest­ing. You will be sur­prised how much you’ll learn. At that point, if you have any ex­tra money to in­vest, no prob­lem. But bor­row­ing money with ridicu­lous in­ter­est rates for the pur­pose of in­vest­ing is a fool­ish idea.

DEAR BRUCE: >> My daugh­ter is in med­i­cal school, and by the time she is done, she projects hav­ing around $200,000 in stu­dent loans. Some of these cost 7 to 8 per­cent and are of the kind where in­ter­est con­tin­ues to ac­crue but pay­ments are de­ferred while in school. I told her that she is go­ing to owe a lot more than she bor­rowed by the time she starts re­pay­ing.

I read that new stu­dent loans are now around 4 per­cent. Is there a way she can mod­ify or re­fi­nance her high­in­ter­est loans? -- A.C.

DEAR A.C.: >> Wow! That is a stag­ger­ing amount of money. On the other hand, your daugh­ter is pre­par­ing to en­ter a field where $100,000-plus salaries are not at all un­com­mon.

That hav­ing been said, I would sug­gest that you go down to the fi­nance of­fice at

the school she at­tends and find out what could be re­fi­nanced and at what rates. Of­ten­times, stu­dent loans that are around 4 per­cent can be found. It may take a lit­tle dig­ging, but it is worth the re­search.

Some­thing else you should look into: There are pro­grams where a med­i­cal stu­dent, af­ter grad­u­a­tion, agrees to prac­tice in a com­mu­nity for a few years and the com­mu­nity will pay off

the loans.

Send ques­tions to bruce@ brucewil­liams.com. Ques­tions of gen­eral in­ter­est will be an­swered in fu­ture col­umns. Ow­ing to the vol­ume of mail, per­sonal replies can­not be pro­vided. The Bruce Wil­liams Ra­dio Show can now be heard 24/7 via iTunes and at www.taera­dio.com. It is also avail­able at www. brucewil­liams.com.

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