Margin Loans

| by RateCity Staff

Margin loans provide you with cash to invest in shares and managed funds. It does this through gearing, which means that you are able to invest in more shares than you could ordinarily afford, while the cash and shares act as security for the loan.

By acquiring extra funds, you have the potential to achieve higher returns with larger investments, but at the same time, you risk taking on more losses in the event that your investments drop in value. If the value of your remaining investment falls below your loan amount, this is known as negative equity, and is the risk that you will need to repay more of the margin loan than the cash you have left.