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It doesn't cost him anything, because the interest rate on the loan is virtually guaranteed to be less than the appreciation rate of the underlying asset.
by hannasanarion 5y ago
It doesn't cost him anything, because the interest rate on the loan is virtually guaranteed to be less than the appreciation rate of the underlying asset.
- bombcar 5y agoThis has only been true during our surprisingly low interest rate environment over the last 20+ years. It could change rapidly and people can get wiped out quite quickly when it does.
- hannasanarion 5y agoDon't confuse consumer and central interest rates for discretionary loan interest rates. The ultra-rich have been taking out ultra-low interest stock-backed loans to cover their living costs and obligations for over a century, and no billionaire has ever been "wiped out" by interest loan.
- tofuahdude 5y agoThat isn't how these mechanisms work from a legal standpoint and ignores many of with-strings-attached realities of this kind of financing. On the flip side, selling the assets would have no strings attached to the cash. Further, it is definitely not guaranteed as you assert.