I paid back all installments of Rs. 200,000 bank loan I took to buy Bitcoin and see if I make profit or loss at the end. The total amount to be returned was 209069, roughly 5% more. I walked away with Rs. 20000 in profit.
As a crypto educator, influencer, media guy my responsibility it to try and educate my viewers/readers to not invest in cryptocurrencies with money they cannot afford to lose. To demonstrate that how bad it can get, I personally took a short term Bank loan to buy Bitcoin and show you in what circumstances, can you actually profit from it.
Fortunately for me, I closed the loan prematurely in 10% profit. You can read more about the loan and previous installments on part 1 and part 2 of the experiment.
I paid the first installment of the loan on July 9, 2020 at a little loss. For the second one I went slightly in profit, by the end of the third and final installment, I closed the Bank loan with Rs. 20245 profit and I closed it in just two months.
Bank Loan and Repayment Details
The loan was taken on my MoneyTap Credit Card. I had to repay Rs. 204348.9 for the loan and incurred an additional cost of Rs. 4720 in charges and tax, making the total repayment Rs. 209068.9. I bought 0.27641673 BTC from the loan amount when the price was around Rs. 723000.
| Loan Amount | Rs. 200000 |
| Processing Fees | Rs. 4000 |
| GST | Rs. 720 |
| Monthly Payment | 68116.30 (Total Repayment: 204348.9) |
| Loan Start Date | June 12, 2020 |
| To be paid before | Sep 11, 2020 |
The loan repayment was calculated as how much BTC need to be sold to payback the EMI amount. I closed the loan early to book profits of around 10%. I am personally not a fan of borrowing money for trading and it didn’t make sense to risk the in hand profit for any longer.
| BTC used for First Installment | 0.095 |
| BTC used for Second Installment | 0.0831 |
| BTC used for Third Installment | 0.0754 |
| BTC Balance Left | 0.0229 (sold for Rs. 20245, this is profit) |
| Loan Start Date | June 12, 2020 |
| Loan Closed | Aug 19, 2020 |
Should you take a loan to Buy Crypto?
The simplest answer is NO. People around the world take loans to expand their businesses, investing in crypto should not be your business. People like Elon Musk takes loans to buy more of their own stock, be a billionaire and still owe banks 500 Million USD. You and I are not Elon Musk.
This article could have been titled, I lost Rs. 40000 after taking a bank loan to buy Bitcoin. This was a genuine possibility.
Hence it is not advisable to take a loan to invest in Crypto. However, if you have a steady income from other sources or you are able to foresee a situation where even if your investment value drops by 80%, you can repay the loan from other income sources, you can try it out. When I took up the experiment I was mentally prepared to sell everything if BTC price went below Rs. 600000 and repay the loan from my own pocket. You need to know your targets.
Taking a debt is not a bad thing as long as you have a plan to use it, and a contingency plan if your original plan fails.
Many people have been burned badly as they invested all their money in crypto. Do not be like that. Take calls based on your risk appetite. Invest money you can afford to lose.
I will keep running such experiments, so you don’t have to. Let me know in the comments below what do you think about this.
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