How loans against investments work
Some banks and brokers lend against a portfolio of shares, funds or bonds, using them as security. They lend only a percentage of the portfolio's value, which depends on how risky the investments are.
If the value of the investments falls, the lender may ask you to add money or securities, or may sell some of your investments to reduce the loan. This is often called a margin call.
Worked example
Borrowing £50,000 at 7% over 5 years costs £990.06 a month, £59,403.60 in total.
Interest is worked out monthly at one twelfth of the annual rate. Lenders may calculate interest differently (some charge it daily), so your actual payments can differ slightly.
The risk
Borrowing against investments magnifies risk: you can lose money on the investments and still owe the loan. Make sure you understand when the lender could sell your holdings.
Inputs for the investment loan calculator
Amount to borrow
The amount you want to borrow.
Interest rate (per year)
The annual interest rate on your loan. The rate shown is only an example, so enter the rate from your quote.
Term
How many years you'll repay over.
CALCULATOR QUESTIONS
Investment loan calculator questions
How much can I borrow against my investments?
A percentage of their value, set by the lender according to how risky and easy to sell the investments are.
What is a margin call?
A demand to add money or securities when the value of your investments falls below the lender's limit.
Can the lender sell my investments?
Yes, usually, if you don't meet a margin call. Check the terms before borrowing.
Is borrowing to invest risky?
Yes. Losses are magnified, and you still owe the loan if the investments fall.