The margin loan rate is often the most important feature of a margin loan because it determines the total amount of interest that you will repay over the term of your loan. Australians always compare online to hunt for the lowest rate, which maximises the profits from borrowing to invest in shares.
The margin loan rate, like any variable rate, is subject to sudden changes, so it is always wise to make sure that you can afford at least a 2 percent rise in your margin loan rate when you budget your repayments. This will help ensure that you are not caught out by rising debt in the future, and leaves you some extra cash that you could use to make earlier repayments.
Because some investments are only held for a short term, there is usually the option of interest only repayments on your margin loan, which will significantly reduce your costs, but also mean that you will never claim any of the principal.
Another margin loan rate is the loan to value ratio (LVR), which tells you how much of your planned investment you can borrow. For example, with an LVR of 60%, a $50,000 investment will allow you to only borrow $30,000, while the rest (40%) will need to be paid as an initial deposit ($20,000).
Compare online to discover some of the lowest margin loan rates in Australia for your best investment funding option, here at RateCity.