Can a Horse Take a Loan?

Clearly not but in one of the courses the discussion revolves around taking money made from horse racing and putting it into something longer term.

The horse racing courses cover more than just betting on horses but other aspects such as money management and best practices. Adding money into something long term is something you should always aim to do whether it is active or passive.

For many people, horse racing simply results in complete losses every week and no money to put somewhere else and is considered to be totally destructive but let's not focus on the negative.

Let's try to focus on the positive.

Say for example, you bought yourself a nice $1 million house and you have an $800,000 loan with an interest rate of 5% and you've taken the loan over 20 years.

You've done well and got yourself a bargain.

There are online calculators to do this but using a little bit of Microsoft Excel, it's easy enough to calculate a rough figure for the monthly repayment. Playing around with Excel is a useful way to spend some time.

Banks calculate interest on a daily basis on the reducing balance, so the figures are not completely correct - but close enough.

For this particular loan, the monthly repayment will be roughly $5280 per month with the total repayment consisting of the $800,000 you borrowed and the extra interest that you paid.

In total taking the loan for the full 20 years, you repay $1,267,115.00 with total interest of about $467K - the cost of doing business. No loan, no house and after 20 years most houses triple in price.

Now let's say for example you launch $100 a week into punting and you start betting at the start of the week and at the end of the week on average you finish with the $100. You basically spent the week betting finishing with your $100 back. Not a great result but still okay.

The Figures

You then decide to dedicate that $100 to the loan adding it and rounding it up to $440 a month (4.4 weeks in a month on average).

With this higher loan repayment, the loan is repaid in about 17.5 years. In other words, you saved yourself 2 1/2 years and around $60K in interest.

The Challenge

Let's say you've managed to achieve a little bit better than getting your money back on the horses and instead you've wagered your $100 on some more choice selections and converted it to $200 (on average). Being a dedicated individual, you then add that $200 each week into the loan.

The New Figures

What's the result? The loan reduces to a bit over 15 years. You basically saved yourself almost five years of repayments, an endless amount of interest (over $100K) and ready to move on to the next project.

Many of us are getting closer to the end than the start and so a 20-year loan may not be on the near horizon but the figures may be useful for someone else you might know.

This is an example of how you can harness your punting or in fact any extra cash into getting somewhere faster and saving money in the process.

The Formulas

Here's the two formulas used in Excel

Calculate the Basic Repayment

=PMT({interest rate}/12,{time in years}*12,{amount in $},0)

Find the Time Period (adding in an extra payment each month, repayment is a negative).

=NPER({interest rate}/12,{repayment},{amount in $},0)

The 0 on the end is the payment is made at the end or start of the month, 0 or 1, doesn't matter in this case. 0 is the end of the month which is normal.