Borrowing to invest in shares can be a great way to make money. But you must proceed with caution.
There are a number of ways to get a loan and use it to invest in the sharemarket.
1. Margin loan
If you already have an investment in shares, you can use these to “borrow” to invest in more shares. Borrowing to invest means your returns will be magnified. But remember, this also means any losses will be greater too. And if you reach a certain threshold, you risk getting a margin call, which means you may be asked to deposit additional money to cover any losses on paper.
Margin loans are generally for active investors who can monitor their portfolio and ensure things remain under control.
2. Investment loan
This is a very tax-efficient way to invest in shares and increase your wealth. As with above, any positive returns will be magnified, but on the flipside any losses will be greater too.
You can get an investment loan secured against the equity in your house. This is a great way to get additional shares without having additional money.
ME Bank investment loans are great with a small setup fee and competitive interest rate.
3. Personal loan
A personal loan is a great way to get money to invest in shares, without putting up other assets or equity. Most lenders will put restrictions on the type of shares/companies you can invest in, to ensure they minimise risk.
Low doc loans with fast approval can be ideal, and as well as shares, you may use it for a holiday, wedding, renovation or debt consolidation.
Best Loans First has a range of personal loans as well as home loans and car loans.
Always consult a professional for advice before making decisions.