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Investor Education > Margin Lending > How to borrow to invest


Margin loans can be obtained by individuals, companies and trusts (but not self managed super funds). Most lenders will offer flexible interest rate options – variable or fixed for nominated terms up to 5 years. Margin lenders also offer savings gearing options which lets you invest in regular monthly contributions, consisting of borrowed funds or borrowed funds supplemented by your own money. This allows investors to manage the risks of investing through dollar cost averaging.

Accessing the best interest rates
Whether you are new to margin lending or have an existing margin loan, it pays to shop around for the best rate. 2020 DIRECTINVEST offers investors a 0.4% interest rate discount on variable and fixed St George Margin Lending loans. This not only applies to new margin loan clients but existing St George Margin Lending clients as well as margin loan clients of other lenders. Existing SGML clients can nominate 2020 DIRECTINVEST as your broker to access the discounted interest rate. Borrowers of other lenders can easily refinance their existing loan to St George via 2020 DIRECTINVEST to receive the discount.

What to invest in?
Margin lenders have a list of approved securities and managed investments against which they will lend. The Loan to Valuation Ratio (LVR) or gearing ratio is the amount you can borrow as a percentage of the value of the security. Typically the approved list of securities include managed funds and shares as well as master trusts, wrap accounts, separately managed accounts and exchange traded funds.

If you are uncertain about margin loans, geared managed funds are an alternative to margin loans. The gearing occurs at the fund level so the fund manager borrows in the name of the fund so investors are not at risk of margin calls and interest is generally paid out of the fund's earnings. However just as a margin loan can magnify losses, a geared managed fund also increase the risk of loss.


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