To protect against losses from a fall in the investment, margin lenders will only lend a portion of the total investment amount. This percentage is known as the loan-to-value-ratio (LVR). So for example, given that a margin loan’s LVR is 70%, if you hoped to borrow to invest in $10,000 worth of shares, you would need to pay 30%, or $3000 as a deposit.
Because some shares are riskier than others, margin lenders often provide a list of a??approveda?? stocks and margin fund companies.
Tax incentives are another benefit of margin loans, but it is always important to double check the terms of your loan agreement, diversify your portfolio. You can compare margin loans for the lowest rates at RateCity to reduce the risks of your investment.