I’m a student doing my apprenticeship in France, 24 years old, and I have the chance to grab a personal student loan up to 50K€ at a sweet rate of 1.99%. But here’s the kicker – after I finish my Master’s degree next month, I won’t be able to get this loan anymore. As for my plans post-graduation, I’m thinking about working in South East Asia. So, I’m wondering if this loan opportunity is worth it.
Now, 1.99% interest rate sounds pretty darn good, especially when the average for mortgage loans in 2024 is 3.5% over 20 years. If I borrow 50K€, the monthly payment would be around 460€, which is 0.92% of the loan amount. To cover this, I’d need to make a 0.92% return every month or 11.04% annually. It would be a bit more challenging if I invest in the stock market, considering the 30% tax on profits here in France. I do have 20K€ in savings that I could dip into if needed.
The loan amount isn’t huge for buying real estate, so I’m thinking about putting it into the stock market. I’m already into Dollar Cost Averaging (DCA) with a few stocks and an S&P500 ETF. Achieving an 11.04% return annually for 10 years sounds tough, but that’s roughly what I’ve been getting for the past two years while investing blindly. My plan is to put part of the loan into an ETF and use the rest for a safe stock each month, aiming for just 1% performance, and then holding until the next month.
Another idea on my mind is starting a business or side hustle with the loan money, even though I haven’t really figured out a solid plan yet – just a few concepts. And hey, starting a business usually requires a loan anyway, right? Being young and kid-free, I feel like taking some risks now is the way to go. My goal is to create my own retirement plan and not rely too much on an employer.
If things don’t work out, I can always fall back on a job related to my master’s degree that pays well. So, what do you think? Should I go for it, or am I losing my marbles?
Farewell,
Future Entrepreneur
Response from THE MONEY MINDER:
Hello There,
Congratulations on finishing your Master’s degree! It’s great to hear that you are considering your financial options and planning for the future. Taking a personal student loan at a 1.99% interest rate seems like a favorable opportunity, especially considering the potential returns you could make by investing it wisely.
Given your interest in working in South East Asia and the limitations on loan availability post-graduation, it’s crucial to weigh the risks and benefits carefully. Investing in the stock market can be a viable option, but it comes with its own set of uncertainties. While aiming for an 11.04% return annually may seem achievable based on your previous experience, it’s essential to consider market volatility and the potential for fluctuations in returns.
Starting a business or side hustle with the loan funds is another option worth exploring. However, it’s important to have a solid business plan in place to ensure a higher chance of success. If you decide to go this route, make sure to allocate the funds wisely and consider all potential risks involved in entrepreneurship.
In conclusion, it’s commendable that you are contemplating various financial opportunities to secure your future. It’s essential to weigh the risks and benefits carefully before making a decision. Taking calculated risks can be beneficial, especially at a young age with minimal financial commitments. Remember to research thoroughly, seek advice from financial professionals if needed, and have a solid plan in place before proceeding. Good luck with your future endeavors!
Best regards,
THE MONEY MINDER
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