RetireJapan

so i have a question about getting a loan and investing money in nisa etc..
previously a number of yrs back i asked a question about paying off house loan/against investing in nisa..

i ended up paying it off-which i have a feeling may have been financially the wrong decision but not entirely sure and made me feel a lot
more secure!

so,currently maxing out 4 nisas ( 2 student kids)
but will not be able to do this next yr and following yrs due to uni fees ...

question is:is it worth getting a loan for student fees given low interest rates in japan and investing in nisas/tokutei etc (and of course using other money to pay student fees)
or is this a dumb idea?

thanks!

bryanc wrote: ↑Wed Oct 09, 2024 2:40 am i ended up paying it off-which i have a feeling may have been financially the wrong decision but not entirely sure and made me feel a lot
more secure!

Most loans prevent you from using the funds for investment purposes. Full stop.

i understand-but they have no way of telling this surely.

Student loans have a higher interest rates than mortgages usually. If not having a mortgage made you feel better, surely not taking on more debt would also make you feel better?

I have considered taking loans out in the past to invest but decided it was not worth the stress or the hassle. Better to do things the safe, slow, and steady way: invest any spare money you don't need right now, leave it alone, get on with your life.

Considered this as well myself. But decided against it. I have kept the house loan though and not attempted to pay it off early.

As RJ says, it is taking on extra risk that may not be good for your mental health/stress levels.

We didn't take out a loan, but out kids did take out a "student loan". To pay for living expenses.it helped pay for food, rent,cell phone etc etc, however the bank of mum and dad, basically just put it into their NISA. I think the student loan interest rate was about 1%ish. I' cant remember the exact rate from JASSO but it was very low but It was worth it for us. When they graduate, they can pay off the loan.But if they drop out, they will have to pay for the loan. But I did take a very long outlook on this.
if the annual return on the S&P is 8%,7% 6% or even 4%,3% it worked out cheaper than repaying 1% interest. But that was for the kids anyway, not for me.
It would be able to compound of many years, as they pay off their 1% interest. It has worked out very well since 2022. But I may be wrong on this, the interest rate doesn't start to accrue until they leave college.(according to the wife it accrues after you graduate). Anyway it has worked out very well for the kids so far and it has grown, quite a lot.
I hope to give it to them, when they graduate, and clear the lot, with some left over. So far, so good.

For us, we just looked at the simple, loan interest rate. 1% interest, v 5% return. This year has been gangbusters though.
As for the home loan. Thats something I never want around my neck, but at the same time, see the logic in keeping it ticking over, and using the money I would have put to over pay the mortgage, divert that to the NISA.
That is a bigger question I have, especially with the loan life insurance element.( and their history of trolling small print and medical records not to pay out).

Update According to chatGPT.

JASSO (Japan Student Services Organization) typically starts applying interest on student loans after a grace period. For most JASSO loans, this grace period lasts for the duration of your studies and up to a few years after graduation. After this period, interest begins to accrue. It’s best to check JASSO's official guidelines or contact them directly for the most accurate and detailed information.

This appears to be the current interest rates on the loans. 1% for us comes to mind　If they translate it, they say REFUND, but I am not mistaken, its shoud be REPAY. maybe someone can clarify that.
https://www.jasso.go.jp/shogakukin/henk ... igaku.html

If you're in a system like shigakukyosai/kosei and have been employed a while, you can probably borrow money from them. I got two million once really on just a basic form filled out for HR/人事課. It took about 2-3 months to arrive in my local account, there's a monthly date/threshold that if you just make it then it could be 2 months, or if you just miss it, then 3. There was no checking for use--I told the lady in HR that we were going to reform our kitchen. Repayment was then just an added deduction on my pay slip, and they'd occasionally send a summary of payments made/remaining, amounts, and so on. (This was when the yen was near its strongest, and I converted and invested.)

You can potentially borrow more (against your retirement/退職金--one colleague did as a part of loans to build a house), but I'm sure you then have to account for its purpose.

RetireJapan wrote: ↑Wed Oct 09, 2024 8:14 am
I have considered taking loans out in the past to invest but decided it was not worth the stress or the hassle. Better to do things the safe, slow, and steady way: invest any spare money you don't need right now, leave it alone, get on with your life.

I have to agree regarding the stress. Only thing was we had a reverse stress situation. Us paying out 2,3,4 million yen only for them to say they wanted to drop out of uni.
So I’d have been more stressed knowing I’d payed 3 millions (from my investments) knowing it would also lose the future compounding element. If I’d lost all that money! And it would have been lost if they dropped out!
On the other hand the student loan , she took out, was used to subsidize her rent, smart phone etc etc, freeing up more money for us to put into the kids NISA.
As it turned out they did indeed decide to leave uni, so it we were thinking of it more along the line as a stop loss approach rather than a pure “investment” approach. As it turns out it’s worked out well with things going well so far.
I guess every family situation is different.

Tsumitate Wrestler wrote: ↑Wed Oct 09, 2024 4:21 am

bryanc wrote: ↑Wed Oct 09, 2024 2:40 am i ended up paying it off-which i have a feeling may have been financially the wrong decision but not entirely sure and made me feel a lot
more secure!

Most loans prevent you from using the funds for investment purposes. Full stop.

Money is fungible. Trivial to use the loan to pay your living expenses and then invest the money you would have spent on living expenses to invest.

Deep Blue wrote: ↑Sun Oct 13, 2024 2:26 pm

Tsumitate Wrestler wrote: ↑Wed Oct 09, 2024 4:21 am

bryanc wrote: ↑Wed Oct 09, 2024 2:40 am i ended up paying it off-which i have a feeling may have been financially the wrong decision but not entirely sure and made me feel a lot
more secure!

Most loans prevent you from using the funds for investment purposes. Full stop.

Money is fungible. Trivial to use the loan to pay your living expenses and then invest the money you would have spent on living expenses to invest.

It's not likely you would get caught, but if you were caught you could be charged with fraud.

I don't understand the mentality where one doesn't feel comfortable with a mortgage at near rock bottom rates, pays it off early, then looks to re-establish leverage through fraudulently obtaining a loan.