What are some good reasons to take out a loan?

[7thLetter]

I've never taken out a loan before other than a credit card.

I'm trying to figure out what I can do with a loan to create another source of income. I don't see any good reason to take out a loan if it's not going to generate money for you, unless you're in a desperate situation and you take out a loan for a car to get to work for example. Other than that it seems to be a waste of money if you're just paying the bank in interest.

What can I do with a $50K-$100K loan, today? I only have less than $5K saved up.

Real estate seems to be a good one, although housing prices in my city are overpriced and I don't have the money right now for a down payment.

Starting a business is one, although I don't have a business idea and I imagine you'd need some sort of down payment for that one as well. Buying a franchise is one I've been thinking about.

e-Commerce? Run a website? Maybe get a loan to start an Amazon business?

Buy real estate or start a business in a cheaper city or country?

Buy stocks & crypto with a loan?

Buy and rent out a car?

I'm lost.

Edited October 12, 2021 by 7thLetter

[Average Investor]

2 hours ago, 7thLetter said:

Buy stocks & crypto with a loan?

If you are good at buying these, then there should be no need for a loan. This would be a good way to lose money that is not even yours. 

2 hours ago, 7thLetter said:

Real estate seems to be a good one, although housing prices in my city are overpriced and I don't have the money right now for a down payment.

If you go this route it will require a lot of research for sure. You should aim for a 15% annual return minimum, or it is not worth the effort. 

2 hours ago, 7thLetter said:

Starting a business is one, although I don't have a business idea and I imagine you'd need some sort of down payment for that one as well. Buying a franchise is one I've been thinking about.

e-Commerce? Run a website? Maybe get a loan to start an Amazon business?

This is going to be the most lucrative thing for sure. Not many people get rich picking the right stock. It's usually through a business that creates a lot of value. If you have not figured out a life purpose and just want to cash in on something there is stuff out there. Depending on the Amazon business you might not really need a loan. You could just go to a goodwill bins and learn how to scan books. Be a way to build up an amazon account and get some cash together to grow it. However, if you want to sell a lot of new products the margins will be much more thin and you will need a lot more capital. You would need the account to get built up a bit anyway. I would not dump a bunch of cash into it until you figure out a niche. 

The thing with running an amazon business is that it really just scales with labor and capital. If you really want to make some money you need digital leverage type scaling. As in some sort of website, youtube, digital product, etc. Something that you make once and can sell a million times. It would take some more effort than going and scanning some books in the bins, but you would be much more likely to get rich that way. The more creative you are, then the more likely it will have a big pay out. The bins would give you some cash now though if you want it. 

I should mention to with some new product style businesses I see they only have about a 10% profit margin. You could do better, but just something to keep in mind. Might require a good chunk of change. New items are easy to sell at least though. Especially if you have the same thing. I've bought bulk new headphones and sold them on ebay with decent success. Only issue is it took $1,500 to get the product, then I had to compete with sellers in China.