Should i get a loan?

Im thinking of taking out a loan so i can buy a website that earns $250+ per month

Heres the loan i might take out.

Loan amount: £ 1130.00
Term: 36 months
Initial repayment: £ 39.77
Subsequent monthly repayments: £ 40.01
Total amount repayable: £ 1440.12
Typical APR: 17.8 %

Do you think its worth it ?

 

Sure, if you are sure of the $250 per month. The APR is bit high, but I wouldn't quibble over it. I would treat it like any other business venture. It shows profit. You could pay it off in five months or so if you took no earnings from it, then you have a solid monthly earner.

 

Instead I would say work hard for another 4 months on setting up a nice , well organized site and you will be getting more than $250 each month.

 

Are all the income avenues of this web site transferable to you? Are there contracts that will back your loan for this income?

I'm of the, "if it sounds to good to be true"...

 

The loan is from HSBC worldwide back mate

 

I'm not questioning the bank man, I'm questioning the validity of the income performance of the site and the transferability of those income methods to you.

 

If the monthly income is guaranteed I'd say go for it, though have you asked questions like where the traffic comes from, search engine rankings, historical earnings etc etc. The most important thing from you point of view is that the money isn't going to dry up once ownership is transfered to you. Also check the whois on any IBLs to check that they aren't from the same person that is selling the site, just to make sure he doesn't take them all down once it's sold.

 

I would agree and say to proceed with caution about exactly how the site makes profits, where, and if anything will be changed.

Next, rather than go to a bank and pay those high interest rates, go to a friend. If you are good for the cash, and won't ruin a friendship by not paying it back there should be no issues.

 

I would pay a visit to moneysupermarket.com and find a better loan rate. You can get a better rate than that with a capital one credit card.

However it will take you a year to recoop your outlay, on that basis i would spend a year building a site from scratch, even taking the sandbox into account it will probably turn a profit sooner.

 

IF the site DOES pull in $250 pcm that's $3000 pa which is, at today's rate, about £1590 - you could effectively pay off the cost in a year. How about an overdraft rather than a loan? It'd be much cheaper...

 

Whoa,

I can't believe that APR!
In Canada, HOME MORTGAGE LOANS are in the 4-7% range and PERSONAL LOANS
like this are around 8% APR.

If it's earning $250/month now (consistently), you should be able to grow it...

Sounds like a SOLID deal, although I do wonder about someone who would sell
a "decent cash flow website" relatively "cheap."

Good luck!

 

Make sure there are: No penalties for early prepayment
Also take a bigger loan: You will need it for startup expenses and making it better.

I am assuming there is work involved to keep the site generating money and you may need some time to get accustomed to that.

 

If you talk to a business broker I don't think you will find businesses for sale in any other area for 12 times monthly net or less. If you have some confidence in your ability to manage the site I don't think there will ever be a better time to buy. As people figure out that maintaining the income from these sites is not that hard, the premium they will pay for the cash flow should increase. I would expect purchase prices to move towards 60 times monthly net income as the novelty of these sites wears off.

So if you can buy today for 12 times monthly net or less, pay it off in a year, enjoy and grow the income for four more years and then sell at 60 times monthly net, you could make some serious money. In dollar amounts the interest rate of the money you borrow to do this is not worth worrying about.

I realize there are risks, but the yield from this kind of investment is higher than that projected for speculative real estate deals and, IMHO, has much less risk.

 

I don't understand the APR either

Local HSBC banks won't charge that much -- personal loans are in the region of 7/8% - even credit cards are 14%

Oh look, the DP ads have loans at 5.7% -- there you go

 

If you have long-term, stable job history, clean credit, and are looking for a secured loan on a personal residence you can get those kinds of rates. If you want risk capital for a business venture you enter an entirely different arena.

Those small used car lots you pass on the way to work are probably paying 5%/month for the money to buy the cars they have for sale. To your lender, they probably look like a safer loan than some internet venture. That's why, as I mentioned before, you can currently buy internet generated cash flows so cheap.

 

As the others have said a loan has front loaded interest and that APR is too high, also a bank may question the purpose, either way I would avoid the loan and go down an overdraft or credit card, that way you only pay interest on the outstaning amount and can pay of the debt as quick as possible with the lowest amount of interest. Your credit card or overdraft would calculate the interest on amonthly basis rather than front loading it so much cheaper if your going to pay it off quickly. You also wouldn't need to declare the purpose for it unlike a loan, however cash withdrawals on credit cards can have high APR so do your homework.