# Best way to borrow 20k for one year and then repay all?



## Chieftain (8 Nov 2005)

Hello,

I'm wondering what is the best way to borrow 20 grand for one year and then replay it all in one lump sum?

I currently have 25k of shares that I can cash now and pay income tax *OR* I can wait a year and cash them in without paying income tax. Obiviously I'd rather wait a year but building the extension can't I'm afraid.

I'm hoping to borrow 20k now without any monthly replayments for the next year and then replay the whole lot off in one year. Is this possible? Any ideas what is the most cost effective way of doing this?

Kind Regards.


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## zag (8 Nov 2005)

It's possible, but you would have a lot of convincing to do.  You would need to convince the bank that you weren't going to do a runner with their 20K and take a years head start with their agreement.

Why not take out a longer term loan with variable rates, cash in some of the shares now and use those to repay a small part of the loan for the year and then cash the balance in a years time and pay off the loan ?

z


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## Chieftain (8 Nov 2005)

zag said:
			
		

> It's possible, but you would have a lot of convincing to do. You would need to convince the bank that you weren't going to do a runner with their 20K and take a years head start with their agreement.


I can show share certs to the current value of 25k. Also have two mortgages & no banking problems in history.



			
				zag said:
			
		

> Why not take out a longer term loan with variable rates, cash in some of the shares now and use those to repay a small part of the loan for the year and then cash the balance in a years time and pay off the loan ?


Sounds okay but if I cash any shares now I have to pay 42% tax - the share were received as a employee share scheme with a 3 year wait to cash ex.tax


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## ClubMan (8 Nov 2005)

Chieftain said:
			
		

> *OR* I can wait a year and cash them in without paying income tax.


Why income tax and not _CGT_?!


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## RainyDay (8 Nov 2005)

ClubMan said:
			
		

> Why income tax and not _CGT_?!


Revenue-approved profit sharing schemes allow employees to purchase limited amounts of shares each year from pre-tax income, provided the shares are held for 3 years. If shares are sold early, then income tax applies (& CGT on any gains).


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## ClubMan (8 Nov 2005)

OK - thanks for that explanation.


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## Trish07 (9 Nov 2005)

Hi All,
My understanding of stocks/shares is that there is a limit to the amount that will be tax free i.e. 1270euro a year and the remainder then has CGT even after holding them for the three year period


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## RainyDay (9 Nov 2005)

Trish07 said:
			
		

> Hi All,
> My understanding of stocks/shares is that there is a limit to the amount that will be tax free i.e. 1270euro a year and the remainder then has CGT even after holding them for the three year period



Hi Trish - I'm pretty sure the limit is much higher - about €12,700 - and yes, CGT applies when the shares are sold (either before or after the 3 year period).


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## ClubMan (9 Nov 2005)

Are you sure that you (_Trish07 _and _RainyDay_) are not talking at cross purposes here - e.g. the "normal" capital gains situation (_Trish07_) versus the special circumstances of an approved Revenue share option scheme (_RainyDay_)? You are both correct but in different contexts!


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## Chieftain (9 Nov 2005)

Hi,

Yep I'm pretty sure there is no restrictions on these share option schemes.

Any suggestions on the question above?

Cheers


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## Bank Manager (9 Nov 2005)

Can be done.........

12 month loan - interest and capital moratorium - agreed date to clear....

lodge shares as security for loan - at todays value bank are covered - may or may not be in the future, depending on share value flucuations, however depending on 'tradeability' of shares in addition to your own income circumstances (which I presume are reasonable) - you should be able to negotiate the deal.

Best of luck.

BM


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## Chieftain (19 Dec 2005)

Hello,

 My bank has agreed to loan the 20k & I will repay in a lump sum in one years time.

The bank in question is charging 1.5k to provide this facility - do you guys think this is reasonable?

 Kind regards.


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## ClubMan (19 Dec 2005)

If that's 7.5% _APR _then it's not bad if the loan is unsecured.


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## pricilla (20 Dec 2005)

Could you get a loan from the credit union over 10 years or whatever and just pay back minimum payments for the next year and then pay it all off together next year. This is probably silly advice, but it's what I'd do if I needed the money quickly.


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## ClubMan (20 Dec 2005)

Most _CUs _will require that you hold a certain amount of shares/deposits in order to get a loan and many charge more than the banks do for unsecured loans. In effect such _CUs _want the individual to provide some security and then charge a higher rate for the privilege. Often the individual would be better off using the money that would otherwise be lodged with the _CU _to reduce their borrowing needs and then borrow the lower amount from a bank that offers competitive unsecured loans. Obviously if security (e.g. a house) is available then the options for lower rates are even better.


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## Fintan (20 Dec 2005)

Have you thought about what happens if the share price goes down? Can your budget allow for it?


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## extopia (20 Dec 2005)

[deleted post due to my pathetic arithmetic.]


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## Chieftain (20 Dec 2005)

Fintan said:
			
		

> Have you thought about what happens if the share price goes down? Can your budget allow for it?



That's what the 5k cushion is for


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