# Loans for Shares



## disarray (7 May 2008)

hi. i'm getting comfortable with trading methodology and would like to borrow some money to add to my IB account. does anyone have suggestions as to good loan companies or methods for this purpose?

i'm thinking an interest only loan would be the way to go but my bank want to charge about 13%, $750 establishment and $250 a year for an unsecured personal loan. i'd rather go without than pay that so i'm open to suggestions on ways to borrow trading capital.

cheers


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## nick2fish (7 May 2008)

Hi, My loan account is with ANZ margin lending. No fees for more than 20,000 borrowings and 10.25% interest. It is secured by way of owned shares and it is diversified. Equity level will be determined on share quality. They do lend on most shares (Just ask Opes Prime LOL) Hope that helps


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## disarray (7 May 2008)

thanks for the reply nick. i don't think a margin loan will work because i want to transfer the money to my interactive brokers account, so the lending institution won't have access to the shares afaik. is your anz loan tied in with your anz trading account or similar?


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## tigerboi (7 May 2008)

disarray said:


> hi. i'm getting comfortable with trading methodology and would like to borrow some money to add to my IB account. does anyone have suggestions as to good loan companies or methods for this purpose?
> 
> i'm thinking an interest only loan would be the way to go but my bank want to charge about 13%, $750 establishment and $250 a year for an unsecured personal loan. i'd rather go without than pay that so i'm open to suggestions on ways to borrow trading capital.
> 
> cheers




Dont do it mate...playing with fire there,trade-profit just keep rolling it over til you get yourself a decent bank...have a look around whats going off
plenty of good runners now & further on...just turn it over when you take profit...good luck..tb


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## nioka (7 May 2008)

disarray said:


> hi. i'm getting comfortable with trading methodology and would like to borrow some money to add to my IB account. does anyone have suggestions as to good loan companies or methods for this purpose?
> 
> i'm thinking an interest only loan would be the way to go but my bank want to charge about 13%, $750 establishment and $250 a year for an unsecured personal loan. i'd rather go without than pay that so i'm open to suggestions on ways to borrow trading capital.
> 
> cheers



 Patience, patience, patience. Slow and steady wins the race. Neither a borrower nor a lender be. Why work for the banks. If you are successful with trading you can get there without them. Some will tell you that you will get ther faster with them but I'll bet there are lots of investors wish they had not gone down that direction. There are not too many that took the slow way that ended up in trouble.


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## MRC & Co (7 May 2008)

If you have your trading downpat, and consistently above bank repayment rates, then why not take a loan.  Afterall, this is a business and you need money to make money, once you have a successful blueprint.

However, can you not simply do the equivelent through CFDs?


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## pilbara (7 May 2008)

disarray said:


> hi. i'm getting comfortable with trading methodology and would like to borrow some money to add to my IB account.



IB has 3 kinds of accounts, RegT Margin (minimum balance $25K for day trading), Cash and Portfolio Margin (minimum balance $100K).  Which kind of account do you have?

I have the standard RegT Margin account, which gives you access to margin loans within the guidelines of "Regulation T" (enforced by USA Federal Reserve Board) which allows you to borrow up to 50% of the value of a security purchased on margin. During day trading you can access considerably more, but at the end of the NYSE trading day you must have 50% margin.


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## nick2fish (7 May 2008)

disarray said:


> i don't think a margin loan will work because i want to transfer the money to my interactive brokers account, so the lending institution won't have access to the shares afaik. is your anz loan tied in with your anz trading account or similar?



Hi disarray, My broker is E-trade (anz),so I suppose it is compatible to ANZ margin lending.I just transfered my equity shares to an E-trade third party equity account. Please listen to the advice of the previous two posts,both are experienced campaigners and the stock market can be cruel. My loan is for tax purposes and I keep my equity to loan ratio is high.
Remember slow and steady wins the race


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## MRC & Co (7 May 2008)

Yes, I gather he already has the RegT, but basically wants more margin on position/swing trades.

CFDs?


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## jersey10 (7 May 2008)

nick2fish said:


> Hi disarray, My broker is E-trade (anz),so I suppose it is compatible to ANZ margin lending.I just transfered my equity shares to an E-trade third party equity account. Please listen to the advice of the previous two posts,both are experienced campaigners and the stock market can be cruel. My loan is for tax purposes and I keep my equity to loan ratio is high.
> Remember slow and steady wins the race




wouldn't fast and steady win the race?

what i mean is i am agreeing with MRC's post above.  If you have a system that will make you more money than the cost of the borrowings it makes sense to load up and make your money faster??


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## pilbara (7 May 2008)

MRC & Co said:


> Yes, I gather he already has the RegT, but basically wants more margin on position/swing trades.



oh wow i see what you are saying now .... but i guess that ain't a suitable question for the "beginner's" lounge!!!  

I think RegT was created after the dotCom crash to put reasonable limits on margin lending in the USA and it's a good discipline to follow.  

If we all could get 95% or 100% margin like Chris Murphy had at Opes Prime, then all hell would break loose.


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## nioka (7 May 2008)

jersey10 said:


> wouldn't fast and steady win the race?




Possibly, but remember the faster you go the greater chance of a crash and the more damage you do if you do crash. Same as road racing, same result. I would compare it with racing between traffic lights, The faster you try, the more fuel you burn and the slow and steady one catches up with you at each set of lights.


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## jman2007 (7 May 2008)

I took out a $16K bank loan last year,

It was basically an unsecured personal loan, I looked into a margin lending loan but found it to be a bit restricted in terms of what I could invest in. But the loan came with 15% pa interest built into it.

I've paid back about 90% of it now, but I agree with Nioka, I rushed into a couple of decisions based more on emotion than anything else, and  when I look back now I have one of those "what the hell was I thinking?!!" moments.

I thought I could be clever enough and beat the banks at their own game, even being handicapped with the loan interest rate.  Tbh, with my erratic dodgy decision making coupled with some actually quite good investments , I have come out even, possibly slightly ahead.

Hmmm...maybe not worth it for me in the end, but I count myself lucky 

That's right Nioka, slow and steady wins the race (most of the time ).

jman


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## disarray (7 May 2008)

i have a Reg-T account but i don't understand margin so i don't use it - i just want to buy what my physical cash can purchase. if i get a loan then i know what i can work with and claim the interest payments as a deduction. i've always avoided debt but a few posts on this board have given me a different perspective so i'm looking at the whole "use debt to make money" concept. i figure the beginners lounge would be a safe place to start looking.

thanks everyone for your insights.


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## MRC & Co (8 May 2008)

Disarray, I would recommend using your 50% margin on IB as opposed to taking a loan.


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## Trembling Hand (8 May 2008)

By my way of thinking the borrowed money cannot be use to trade larger without breaking the BIGGEST rule in the book. The 2% rule (or 1% or whatever)

If all trades were sized at 2% risk of *your *capital (not borrowed money) There is no way of using that borrowed money without breaking the best survival rule out there.

What you are about to do is break the excessive margin rule in a funny way but still break it. Fundamentally your loan is no dif than margin and you shouldn't trade bigger with more margin. I don't buy that trading is a biz so its fine to borrow as doing that without regards to your capital at risk with leveraged $ is not running the biz properly.

Lots has been said about the position sizing elsewhere. I would just use IBs margin and stick to proper risk with your cash.


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## MRC & Co (8 May 2008)

Trembling Hand said:


> Fundamentally your loan is no dif than margin and you shouldn't trade bigger with more margin.




I agree.

However, 50% margin and an increase in overall risk per trade (say from 1-2%), due to the use of the margin, will allow you greater possible returns and allow you to dip more fingers in more pies, with double the risk, but still within appropriate guidelines.  Wheras, if you simply increased your risk per trade to 2% with your initial capital base through larger position sizing, you would be left on the sidelines of a few trades with positive expectancy.  I would only do this however if you have a positive expectancy and within safe parameters (however you choose to define that).  I think I just confused myself with that (brain is fried), correct me if that is wrong.  

But afterall, isn't that what margin is for?  

Of course, every single situation has positives or negatives, otherwise the choice would be easy.


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## Trembling Hand (8 May 2008)

MRC & Co said:


> But afterall, isn't that what margin is for?




Margin is not for bigger risk (per trade). Thats what your saying I think.


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## nomore4s (8 May 2008)

MRC & Co said:


> I agree.
> 
> However, 50% margin and an increase in overall risk per trade (say from 1-2%), due to the use of the margin, will allow you greater possible returns and allow you to dip more fingers in more pies, with double the risk, but still within appropriate guidelines.  Wheras, if you simply increased your risk per trade to 2% with your initial capital base through larger position sizing, you would be left on the sidelines of a few trades with positive expectancy.  I would only do this however if you have a positive expectancy and within safe parameters (however you choose to define that).  I think I just confused myself with that (brain is fried), correct me if that is wrong.
> 
> ...






Trembling Hand said:


> Margin is not for bigger risk (per trade). Thats what your saying I think.




Agree with TH here.

If you're not comfortable using 2% risk without margin (say you're using 1%) then you shouldn't be using 2% with margin.
It just means you can take on more positions (with the same risk) but this also requires some sort of risk management because you have more overall exposure to the market.


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## MRC & Co (8 May 2008)

Trembling Hand said:


> Margin is not for bigger risk (per trade). Thats what your saying I think.




Ability to take more trades without having to cut position size and hence potential returns through a positive expectancy methodology, whilst taking on more risk which is the negative, but still within relatively safe parameters.


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## bvbfan (8 May 2008)

Depending on the amount I think there are loans out there for rates around 11-12.5% that are pretty good. No account fees, redraw facilities so you can draw as you need.

Credit unions  might be a better bet than banks but the new era of lending they may be harder to get.


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