Hi, I've recently been offered line of credit from my bank and I'm relatively new here so need to build credit history. At the same time I am keen on investing. A friend suggests I loan all the money and put it in FD in India. That will fetch me safe margin. Please suggest if that sounds like a good option? Or would it be better for me to concentrate on buying a house here, rent it, sell it instead and plan the Canadian way?

I need thorough advise from an expert please !

Will appreciate !

You have not stated if the PLC was pre approved or it is full application. What is the interest rate ? What is the amount? What is your financial situation? Risk tolerance ? Investment horizon? Any investment advice without these inputs can be erroneous.

Just to build your credit you dont need a line of credit, even a credit card is enough. Getting a line of credit for your future emergency is good idea. Borrowing money for investing in India can be risky business with the currency fluctuation and have to count currency conversion charges also. Also consider that Interest earned by you in India will also be taxable. Had this been lucrative deal every desi would have been in this.

Property price do not increase that much in Canada that you buy, rent and sell and you make money. And even if you make money, CRA gets its fair share.

"That will fetch me safe margin."
I dont understand what it means.

Hi informaxim2011

Please check your PM.

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Best regards

Lali

What your friend is suggesting is an interest rate arbitrage i.e. borrow at a lower rate and lend at a higher rate, then pocket the difference.
However, keep in mind that in order for this scheme to work, you are making a bet on future interest rate movements as well as currency movements.
For this scheme to work, the rates in Canada must stay the same and the value of INR vis-à-vis the CAD must stay close to what it is now.
If interest rates rise in Canada (quite possible), or rates fall in India (unlikely though) or the INR devalues further (very likely), your scheme may not be as profitable as you think.

There are other considerations, too.
For instance, a LOC loan is callable by the bank any time.
The interest earned will be taxable for you in Canada.
If the amount in question is > $100K, you will have to file an additional form with the CRA for foreign property above $100K.

It is not as hassle free as it seems.

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