Can i use Personal Loan to buy Shares and MF?

Let us say u have taken personal loan for 2lac/4 years and u actually need loan only for 6 months.Can u use the loan amount to invest in shares and MF ,instead of repaying it.Is there any legal issue involved in diverting personal loan to buy shares?As per HDFC agent personal loan should not be used to buy shares.
Please clarify….

2 Replies to “Can i use Personal Loan to buy Shares and MF?”

  1. I would think (but am not sure) that on a personal loan, you put on the application what you plan to do with the money. If that purpose included investing/gambling, or was general enough to include such things, then I suppose it would be legal and ethical. You would have to check the loan documents for prohibited uses.

    That said, I think it would be extremely foolish to put the money from a high-interest personal loan into the market. The return, if any, is probably not going to cover the interest rate. Let’s say the interest rate on your loan is 15% (I’m being very kind, here). If you replay the loan after 6 months, it’s like getting a guaranteed return of 15% on your money. Most investors would jump at the chance to make 15% with zero risk.

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