How I receive low-interest loans?

As many of you know, I take low-interest loans from credit cards and buy dividend paying stocks with above average yield.

In other words, I borrow money to invest in stock market. I have been using this investment strategy for almost 5 years now and was able to build over $230K assets with high-quality dividend growth stocks.

And, my dividend portfolios generate over $9350 pure passive income annually (as of this writing). It is a decent cash-flow to rely on, and it is growing faster than inflation and rate hikes.

If you check my monthly net-worth updates, you could easily notice that I have a lot of credit cards debts, the majority of them are with less than 3% interest rate.

Actually, I used those debts to purchase investment to accelerate my financial freedom journey, and I’ve never used them to buy luxury stuff or to impress others.

And, many of this site readers were wondering how I am receiving loans for such an ultra-low interest rate.

Before I discuss it, I would like to tell you that leverage investing is very risky. If you don’t know how to use this strategy, then you may end up losing more money than you had it before.

Robert Kiyosaki, the author of the best-selling book ‘Rich dad Poor dad‘, said debt is like a loaded gun. If you use it right, you can take advantage and protect yourself, and if you don’t know how to use it, then you may kill yourself.

This is the reason, I was little hesitating to write about it because I didn’t want to mislead readers and put them into deep debts.

So, please be responsible for your debts.

But, I wanted to write this post because some readers requested me to create a post about it, and also this may help to save some money for those who are paying more than 20% interest -rate for their debts.

Therefore, if you receive any low rate offers, and also if you have debts with extremely high rate, then you may consider transferring some money from a lower rate to high-interest cards and you could save some money.

And, you must stop accumulating more debts after that.

Be smart with money and debts, otherwise, it will cost you a lot later.

Low rate credit cards offer I received recently.

Here are some low rate offers I received recently from (some of my) credit cards:

MBNA Credit Card

0.99% special rates for 12 months

Check offers at MBNA Canada

Royalbank Visa card

1.99% special rates for 12 months

Check offers at RoyalBank Canada Bank

Scotiabank Visa card

0.99% special rates for 9 months

Check offers at Scotia Bank

These are just a few examples of recent offers I received. I have few other lower rate offers from other lenders as well.

Therefore, I can easily pump over $100K into the market and buy more income producing assets, but I am not going to make those crazy moves because I know my limit.

I have been receiving these types of special offers for the last couple of years from many different lenders, and I take these offers, add extra money from my savings, and invest them in high-quality dividend growth stocks with the average yield of 4%.

Basically, all I am doing is to increase my cash-flow by adding some risks on me.

I understand the two most important financial terms for wealth building.

First, compounding power will give a heavy lifting for your net-worth if you start early and with more money.

Second, inflation will devalue your cash and debts if you hold them for a longer period. Thus, my debts are getting devalue or stay same every year as long as I keep the borrowing cost lower than the inflation.

Also, whenever I take money from a credit card, I always have a plan to pay it off completely before the end of its promotion period. My plan includes:

• Transfer from another credit card with similar or lower rate
• Use margin loan (for a short-period)
• Use HELOC (for a short-period)

Luckily, I keep getting new offers from many different lenders so I don't need to use any of my back plans for the near future.

Please note that I don't apply new credit cards to receive these offers. I have been receiving these offers from my existing credit cards and line of credits.

Actually, I was lucky that interest rate was low for longer periods, so I was able to build a decent size of portfolio with blue-chip companies, which generates around $9350 cash per year (as of this writing).

Now, the cash-flow is growing its self with dividend hikes and dividend reinvestment.

As results, I don't need to add more risks to me. So, I stopped taking money from credit cards for investment purpose and turned my focus on debt reduction.

It may be hard to repeat this success again for another 5 years as rate starts to rise, so banks may not lend me for lower rate again because their profit margins won't be same. So, the back plans must be strong enough to handle any unexpected events.

Let's see how I am getting these offers:

How I have been getting lower interest rate offers

My honest answer is 'I really don't know how I am getting them', regardless I am getting these offers even after the Bank of Canada hiked the rate three times within a year.

There are few guessing I can make:

• I have good credit history and credit score
• Lenders are able to borrow money for even lower rate
• Lenders may think that they can collect more money if I couldn't pay them by the end of the promotion period
• Banks can increase the money circulations
• Etc.

My credit history and high credit score (My guessing -#1)

Maybe I have a long and wonderful credit history and a fairly high credit score. I checked my credit score last week, and it is at 799. You could check your credit reports and score for free. I will post about it on this website in few days.

I have over 10 year's credit history in Canada. I use my credit cards for almost all my spending, actual reasons to collect points and receive cash-back (while building my credit history as well).

It doesn't mean I am spending money just for points or cash back. These are for regular things like gas and groceries I am going to buy them anyways while getting a little back and pay the balance full by end of each month.

Consequently, my credit history gets improved. So, lenders may view me as a low-risk borrower, and they are ready to lend me money for a lower rate.

Banks borrow money for even lower rate (My guessing -#2)

There are so many people out there having saving accounts with interest rate of less than 1%, even some people have cash saving with almost zero interest rate.

Banks take the money and lend it to people like me for few points more and profits the different.

Banks also charge a promotion fee of 1%, and some even charge more. Thus, banks make profits by lending money to low-risk borrowers like me.

Please note that I always add the transfer fees into my borrow cost in my cash-flow calculations.

Lenders may able to collect more money after the promotion period (My guessing -#3)

Some borrowers spend money without thinking about their future. When they receive offers like this, they spend like there is no tomorrow, and by stuff to impress others. This stuff doesn't produce any cash-flow and depreciates value over time.

Actually, lenders like these types of borrowers because the borrowers won't notice the impact until the end of the promotion period – usually from 6 to 16 months.

After that, they will feel the pain of over 21% debts service charge, while lenders will harvest the benefits.

But, I am not one of the borrowers. As I mentioned earlier, I always have a plan to pay the full amount by end of the promotion period before borrow money.

If I don't have a plan, then I won't accept the promotion and let it expire.

Easy ways to circulate money (My guessing -#4)

One of the mandates for banks and government is to circulate money as possible as they can and keep them active for economic growth.

They don't want to keep a lot of cash in one place as dead money. Dead money means an amount of cash sitting in one place and do nothing for economic.

So, banks look for borrows, preferred to have thousands of low-risk borrowers to circulate their dead money.

Conclusion

If you are receiving these types of low rate special offers from your banks and credit card companies and if you have other debts with higher interest, then you may start doing some calculations and think how you can minimize interest charges by taking advantage the special offers.

If you don't receive any offers from your banks, then you should start to build your credit history and improve your credit score.

Use your credit cards for your regular purchases and pay-down them down completely by end of the month. If you have credit cards with a good rewards program, then you can take advantage of the benefits as well.

If you don't have any credit history, then you may start building one for yourself. Maintaining an excellent credit history is important to secure loans for lower rate.

As I always say,

• Educate yourself, understand about money and improve your negations skills
• Be responsible with your debts and spending
• Spend less than you make and invest the rest,
• Spend 5 to 10 minutes at least once a week, review your financial situations and think how you can improve them

Thank you for reading!

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Disclosure:

• I am own shares of TD, Royal Bank of Canada , Scotiabank, and few other financial institutions
• This post may contain an affiliate link. Therefore, I will make a referral commission if you use the links above to purchase products or services (at no additional cost to you).