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Margin Loans - Who is the best lender?

Discussion in 'Shares' started by Sk3tChY, 6th Aug, 2007.

  1. Sk3tChY

    Sk3tChY Well-Known Member

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    Hi all,

    Im relatively new to the boards, and to the whole investing game. In light of my current situation, where i'm basically earning alot of money, with basically no debts, and expenses, i've chosen to make use of my money, rather than have it just sitting there.

    My financial plan is basically to try and build up a nice portfolio in direct shares, using both my own capital, and a substantial margin loan.

    Im basically considering one of two options, depending on how much capital I have at the time of getting the loans;

    $10,500 of my own capital and a $24,500 margin loan.
    $21,000 of my own capital and a $49,000 margin loan.

    These figures may change a little bit, I may lower my LVR, but for now, these figures are just to give you an idea on my situation.

    I would also be pre-paying the interest for 12 months, unless I can get a cheaper rate paying monthly in arrears.

    So, my question is;

    Who are the best margin lenders out there? And who would you reccommend? My main concern is the interest rate, i'd like to get the lowest possible interest rate I can find. And please, im new to all of this, so if theres other things I should take into consideration besides interest rates, by all means, let me know. (Also, im well aware some people find customer service very important. But ideally im hoping to not have to deal with the lender for 12 months.)

    The cheapest interest rate i've been able to find is thru Suncorp, and is 8.35% pre-paid 12 months. Suncorp also seems like a good, well established, reputable company.

    All feedback would be greatly appreciated, thanks guys.
     
  2. Simon

    Simon Well-Known Member

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    Here is the thing - I use LE and have never tried another company so cannot compare. I guess most of us are in the same boat.

    These companies do much the same thing. I doubt there is much difference between them all. 0.1% increments of difference don't really matter when you are claiming it.

    I think the key might be to find a margin lender that includes your stocks on their security list. If you are choosing blue chips then I doubt you will see much difference here either.

    How to choose? I dunno. I went with LE 10+ years back and have been happy ever since.

    Good luck.
     
  3. Sk3tChY

    Sk3tChY Well-Known Member

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    As you've said, they basically all do the same thing. And the stocks im buying are basically on every security list. My hope is to go in there, fill out the forms, pay the interest 12 months in advance, and not really have anything to do with the lender for the next 12 months.

    Which is why my only real concern is the interest rate. Best i've managed to find so far is Suncorp @ 8.35%. Is there any better out there?
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    InfoChoice gives a good overview and comparison: INFOCHOICE | Investment | Margin Lending

    ... how much are you looking to borrow ? You can generally get better rates with most lenders if you have a larger loan. Typically 0.25% off their standard variable rate for every $250K borrowed (up to a maximum $1m) is pretty each to get.
     
  5. Sk3tChY

    Sk3tChY Well-Known Member

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    Im only a beginner to all this and just starting out, Im going to be borrowing either $24,500 or $49,000. So the only way I think im gonna get a reduction is by pre-paying the interest.

    ps: That website dosen't show very many lenders, and also by the looks of it suncorp still looks the best on that one. :p
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Actually - it shows pretty much all of them.

    I would use their LVR tool to compare the LVR offered by each lender for the shares you own or plan to own. The higher the LVR, the larget the buffer you have if the market falls sharply - can make the difference between facing a margin call or avoiding one.

    INFOCHOICE | Investment | Margin Lending | Compare

    Also, consider a lender who offers a 10% buffer on shares (many only offer 5%), which again, can make the difference between a margin call or not.
     
  7. Simon

    Simon Well-Known Member

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    Who do you use Sim?
     
  8. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I use LevEq and St.George ... LevEq give great customer service ... but their LVRs aren't quite as good as St.George (whose customer service is not as good).
     
  9. Sk3tChY

    Sk3tChY Well-Known Member

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    Where abouts is the LVR tool? And isn't the average 70-75%

    True, thanks i'll try that. I'd be investing in blue-chips which hopefully shouldn't drop more than 5%, but because of the recent falls in the market, my SGB dropped to below 7%..!

    A 10% buffer may prove very handy.
     
  10. Simon Hampel

    Simon Hampel Co-founder Staff Member

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  11. Sk3tChY

    Sk3tChY Well-Known Member

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  12. bundy1964

    bundy1964 Well-Known Member

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    SGB has had extra securiety from me for a week now and it is still to show on my account.
     
  13. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    St.George Margin Lending only update their security data once a month.
     
  14. Sk3tChY

    Sk3tChY Well-Known Member

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    Is there any lending facility (besides commsec) that will let me keep my shares on commsec, or do all lenders make you transfer your securities to them?

    ps: Sim you have a commsec margin loan If I remember right.. Whats the interest rate on about $24,500 @ 12 months prepaid..? Like 9.1% right?
     
  15. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Nope - no commsec for me.
     
  16. Sk3tChY

    Sk3tChY Well-Known Member

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    Ahh k, must of been someone else.

    But yeah, will I always have to transfer my securities over to the lender, rather than be able to keep them on my commsec account..?
     
  17. bundy1964

    bundy1964 Well-Known Member

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    They just advertise it as being good to go in 24-48 hours.:rolleyes:
     
  18. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I don't think there's necessarily any direct connection between what shows up in your online reports and what is "good to go". This is why I keep my own very accurate records of my exact position on a daily basis (especially in this current market !!!).

    I think the margin lenders are generally very poor at showing accurate records - I don't think there's any excuse for it, and I think they all need to lift their game. There's a huge scope for innovation in this area and I see nobody really trying that hard :(
     
  19. Sk3tChY

    Sk3tChY Well-Known Member

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    Sim, since your with LE, how do you monitor your shares?

    Im taking it you had to transfer them over to LE, how do you go about monitoring them? Do they have some sort of platform similar to commsec?

    Or do you just use commsec, and monitor them from there by working it out yourself?
     
  20. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I only hold managed funds, and I verify fund transactions directly with the fund managers and loan transactions with the margin lenders, and then use a spreadsheet to track the value and loan LVRs based on unit prices as they are published daily.

    This way by approximately 6pm each day, I have a very accurate figure of exactly where I stand as of the end of the previous day's trading (or the night before's trading for funds which are based on US trading time like some of the Platinum funds).

    My goal by the end of this year is to have that completely automated and online.