By starting a margin loan account, you can boost your investment potential by borrowing for larger investments, which is known as gearing. This means that a margin loan account can return high profits in the event of your share value increasing. However, it will also incur bigger losses if share prices fall.
A margin loan account gains equity when the gap between your borrowed amount and the value of your investment widens. However, if your investment value falls below your borrowed amount, you will achieve negative equity, which runs the risk of requiring you repay more money than what you have left.
Every margin loan account has its own loan to value ratio (LVR), which measures your initial deposit.
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