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Margin Loans Question about CommSec Regular Gearing Margin Loan

Discussion in 'Finance & Banking' started by yisongxie, 27th Apr, 2007.

  1. yisongxie

    yisongxie New Member

    Joined:
    26th Apr, 2007
    Posts:
    4
    Location:
    Melbourne, VIC
    Hi, I am a new player in investment, and interested in Gearing Margin Loan. I found in CommSec they have a regular gearing margin loan. But I dont understand how it works.

    It sounds that the investment would combine the regular cash with regular borrowing. But how long is the loan? How to repay it?

    Maybe it is a stupid question, but it did confuse me. :confused:
     
  2. Simon

    Simon Well-Known Member

    Joined:
    17th Sep, 2005
    Posts:
    520
    Location:
    Newcastle
    Most Margin loans are LOCs. They do not have a set loan term and only the interest needs to be repaid or capitalised if possible - theoretically the loan could last forever if you chose.
     
  3. yisongxie

    yisongxie New Member

    Joined:
    26th Apr, 2007
    Posts:
    4
    Location:
    Melbourne, VIC
    Thank you Simon. Does it also mean that I can cancel the loan anytime if any situation changed?

    And I heard that there are 2 margin loan strategies. Borrowing a big mount as a start, or using cash as the start, and then borrowing the money as gearing margin loan. So which one would be better from the risk control?
     
  4. Simon

    Simon Well-Known Member

    Joined:
    17th Sep, 2005
    Posts:
    520
    Location:
    Newcastle
    You need to have 20-40% security for the shares - or 100% if they are not acceptable to the lender.

    So you will be limited by the funds you have to start with.

    There is no better way. Either is best if it times the market right.

    You need to work out what you think each share or fund will do then decide what is best for you.

    and yes - you can cancel the loan at anytime by paying it out or selling the underlying shares.