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Lenders & Reporting Income

Discussion in 'Beginners Bootcamp' started by lugie, Feb 20, 2008.

  1. lugie

    lugie Recruit

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    Hello,

    I will soon be applying for a large loan. As a recent victim of a temp agency, I am looking to compensate for my new found part-time job with Forex.

    My goal is to start earning ~$500/mo on a $3000 initial deposit within 3 months. I realize this is a bit dreamy.

    Would it be possible to report this as equity to my lender? Would they consider this reliable income (comparable to a job)? What's the average lender's attitude toward Forex?

    I am currently hooked into FXDD & MT4. I also intend on analyzing and testing many of the EAs out there and eventually choosing a diverse(ish) portfolio of EAs to build some solid income.

    Hopefully that's enough information for some solid advice. Let me know if there may be other factors involved!
     
  2. Pharaoh

    Pharaoh Colonel

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    I think your lender will be aware of 2 facts.

    1. It is possible to make the kind of returns you are hoping for, however...

    2. The vast majority (estimates range from 80% up to 95%) of new traders lose money.


    Think about it for a moment. If someone came to you asking for a loan under these circumstances, would you consider their plan to make money trading forex to be a good thing or a bad thing?

    On thing a lender will look at is how much cash you have on hand. Demo trade while applying for the loan and keep the $3000 in your savings account until after you get the loan.

    Even then, trade very conservatively. Never risk more on a trade than you are willing to lose.
     
  3. rpaco

    rpaco Sergeant

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    I doubt anyone would lend you money to trade forex with, except some less than reputable people with a very high interest rate.

    There is at least a 19::1 chance that you will loose all the money and more, thus making you a dream candidate for lenders who always get their pound of flesh.

    You must have read that you should never trade with capital that you cant afford to loose. It's true.

    Even the good guys get it wrong and have periods of continual drawdown. Save up first and paper trade. Even then it's not the same as live trading.
    There are lots of courses on the web for free I have now about 500 pages downloaded and have paid for only about 60 of them
     
  4. dryfterwylde

    dryfterwylde Recruit

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    Hey Lugie

    First off congrats on your decision to set some goals and pursue forex as a part time income, happy trading to ya and I hope it all goes as planned...or better of course ;)

    A very close freind of mine is a banker and trades stocks part time, she cannot use any of her trading income on the loan application because they do not see any stability in the income unfortunatly. Like any self employed person (which is the closest thing they considered it to), they wanted 2 years of solid proof of income on a tax assesment or the like. Thats here in British Columbia Canada anyways, the banking rules might vary where you are. My guess would be that they would not count it as income at all yet. I wasnt sure if meant that you wanted to borrow the money to start up however, if thats the case, any good trader willl tell you trading on borrowed money is a bad idea to start with. I would be very surprised to hear of a bank lending you the capital to start up a forex account, no doubt they would be as as likely to lend money to fund your online gambling account ;)

    Regardless I hope things work out for ya! Happy Trading.

    Dryfter
     
  5. lugie

    lugie Recruit

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    Thanks for the replies all.

    The loan would be for things unrelated to forex trading. I want to build income with forex to finance a loan (mortgage). I wondered if banks typically "believed" a person who said they make reliable income from forex. Well, my question is (unfortunately) answered. At least now I can stop thinking about the house I have on my mind and start thinking about trading. :)

    Regards.
     
  6. rpaco

    rpaco Sergeant

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    To expand with tongue in cheek a little, Forex trading would most likely be seen as a liability not an asset, like for instance , a sub-prime mortgage, we all know the banks would never lend against a sub prime mortgage, would they?

    Unless of course you could gather a load of us not so good Forex traders and put all our unstable incomes and losses together. With 95% of us failing there should be a huge opportunity here for an enterprising bank to issue FDOs (Forex Debt Options).
    Against which another bank would lend 3 times their combined negative value. This of course would be a rock solid base for a 10 times credit arrangement with a major Trading house. With all this huge asset one could then move the market. Perhaps buying the Yen as it falls until the only option is a an MGM film with Ewan McGregor.
     
  7. Pharaoh

    Pharaoh Colonel

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    Rpaco!

    That's Brilliant! We don't even need money to trade forex, we just get loans that are repackaged as AAA rated bonds to finance our trading.
    :D


    Seriously though, unless you have a long-term proven track record as a successful trader, the bank will view this the same way as if you told them you were going to make money betting on horse racing in order to keep up with your payments.
     
  8. fared01

    fared01 Recruit

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    I just joined here, but I am pretty disappointed with the responses to this post.

    Lugie,

    If you are in the U.S. and you want to include trading income on your mortage application, you need to apply for a "no-doc" or "stated income" loan. You will pay a slightly higher interest rate as the lender is relying your claim of income which is not verifiable. You will do better, if you can qualify for your without relying on this income (your lender might allow for a percentage of "self-employment income" to be included). You will get a better rate and have your trading income as "extra" for yourself or as a buffer against problems.

    If you are outside of the U.S., there may be similar loan programs in your country. Your best source of information will be lenders in your area.

    Ed
     
  9. Pharaoh

    Pharaoh Colonel

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    From Lugie's original post, I'm assuming he's not been actively trading forex yet.

    If so, then his potential forex income probably wouldn't even qualify for non documented or stated income any more than if he was planning to use a new system to beat the odds in Las Vegas.

    On the other hand, if Lugie does have some sort of track record making profits, then Fared's plan to use it as stated income is probably workable. I'll also agree with Fared that it would be better to qualify without the forex income, not just for better interest rates, but also in case things go terribly wrong with your forex trading at some point.
     

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