I have been receiving "cheques" from Standard Chartered Bank lately.
Basically, these cheques are given to me in letters which they have been sending.
So far, I have received 2 cheques.
The instructions states: Simply bank in the attached cheque and enjoy cash at 0% interest for six months with just a nominal fee of 2.5% on the cheque amount.
No gimmicks, No hidden cost?
It says that the promotional rate of 0% interest is valid for 6 months and thereafter, the prevailing interest rate applies. I am not too certain what is the prevailing interest rate for this credit line.
Still, it sounds like a pretty attractive option doesn't it?
I get a cheque for $8000. The 2.5% nominal fee adds up to $200.
So after 6 months, all I need to pay back will be $8200. If I am able to use this money to buy some stocks and the stocks happen to rise in price... I will be using Other People's Money to make money!
But of course, the reverse could happen where the stock prices are depressed after 6 months and I could be stuck in a serious quandry. To liquidate the stocks at a loss and still pay up the $8200.
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Avoid leverage. I am sure there is some fine print involved. Banks never loan money without getting a higher than inflation return back to themselves. They are profit-making machines and are not prone to do charity work. Hahaha.
ReplyDeleteHmm Musicwhiz,
ReplyDeleteI think some element of leverage is good .
But 2.5% for six months that means about 5% per year.
Do we have to pay back some portion of principal+ interest per month?
I dont think they will allow you to pay back only at the end of 6 months from my experience.
In this case the reward to risk ratio not really worth it.
SGDividends
2.5% for 6 months to buy stocks with leverage?
ReplyDeleteI think it you seriously seriously want to do that, it's much better to do so with CFD. Depending on the type of share, the amount could be lesser.
Thanks for all the comments. Yup, I am leaving leveraging to a later date when I am more comfortable and confident in my investing strategy.
ReplyDelete