Borrowed money from the bank to Invest in stocks

[Jitster]

Ok, I made a dumb mistake by borrowing money from the bank to Invest in indivudual stocks. I borrowed £40K at 4% interest rate. Now I'm left with 19K! And a debt of £32K. The 19K is now fully invested in Vanguard All world ETF. I also have £21K in savings.
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Should I pay this debt by selling the ETF and using savings? Or should I keep on paying the monthly loan repayment amount of £477 for another 6 years?

When did you do this?

To recoup that loss could take years so first off how old are you and what length term is the loan and are there any early redemption fees on the loan?

2020

43 years old, loan term is 10 years - fixed 4%. I can pay off the loan whenever I want with no additional costs. The thing is the ETF has gained 11% in value.

Can you be more clear - so you have £19k in savings and £21k in savings, and £32k in debt?

I have 19K invested in ETF and 21K in savings, and 32K in debt.

What tax bracket are you, what rate do you pay interest on your savings on and what interest are you getting on your savings?

How much did you put in the the ETF?

At the moment you should be able to earn more than 4% on savings so I would do that and not pay off the loan yet.

21% tax bracket. Bank interest is 1.25%

16.5K invested in ETF, current value is just over 19K. Bank interest is only 1.25%.

Did you put the whole £40k into Vanguard and now it's worth £19k? Or did you originally invest £16.5k and now it's worth £19k?

What did you do with the rest? £16.5k and £21k in savings doesn't add up to £40k.

And why are your savings in an account that only pays 1.25%?

Either put your savings into a high-interest account that pays more than 4% or use the whole lot to reduce the loan.

Are you in Scotland?

Anyone know what the tax-free limit on savings interest is in Scotland? Is it the same £1000 or £500 as in England?

I've answered my own question: income tax on dividends and savings is the same across the UK.

Where did you put the savings?

For the bank interest I suggest that you get on money saving expert and look up top savings accounts. You could be earning over 5% in an easy access savings account. From that you could drip feed regular savings accounts which could be earning more. All of that will be earning more than your 4% loan and mean that you are better off keeping the savings. Make it your Easter weekend project.
Of course, this may well change when interest rates come down, but at the moment, no I wouldn't pay off the loan.

I'd double check the terms of the loan and make sure that you were allowed to do that.

Secondly I'd give my head a wobble and sell all the stocks etc., and pay the loan back, and use £12k in savings to pay off.

You don't have the money to invest and save if you're £32k in debt.

Is your ETF in an ISA? I'm assuming that you dabbled with risky stocks, made the losses, then transferred what was left to the ETF. Is that what happened?

Yes, irrespective of being able to make a few quid using savings interest versus paying off the loan, I'd just want to be out of this crazy situation TBH, so I'd pay off the loan, and start adding savings to my emergency fund.

Did you put the whole £40k into Vanguard and now it's worth £19k? Or did you originally invest £16.5k and now it's worth £19k? What did you do with the rest? £16.5k and £21k in savings doesn't add up to £40k. And why are your savings in an account that only pays 1.25%?

Yes, all of these questions. The figures aren't very clear op as they don't add up to £40k.

Which stocks did you invest in that lost so much?

The maths isn't working for me on your figures.

I day traded the 40K and ended making a loss of 23.5K. I then invested the 16.5K in an ETF, which is now worth 19K. The 21K is cash savings/emergency fund.

I didn't shop around for the best rates, my bad.

The 40K was a loan which I bought individual stocks to day trade. The 40K quickly turned into 16.5K. I then put this amount into an ETF which is now worth 19K.

The loan amount which I have to pay back through monthly payments of 477 is now reduced to 32K.

Altria, Nio and Nikola.

Remember that you will be paying the 4% interest out of taxed income so depending on unless you organise your savings to ensure you are not paying tax on the interest - so ISA or within the tax free allowance that depends on your other income you will need to earn significantly more to make keeping the savings worthwhile.