Hi all, total n00b here with my first post
Why do people use a margin loan? Is it mainly because they don't have or can't access a Line of Credit (LOC)? My commsec margin loan is 8.9% but my LOC is 7.42%. It seems to me that i'd be much better off using the LOC instead of the margin loan. Not only do i save about 1.5% in the interest rate but i also avoid the $10 transaction fee that commsec charges each time. Is that blindingly obvious to others or have I missed something?
Also, do people think it's extra risky using a LOC to buy shares and then giving them to a margin lender (eg commsec) to then use as security for a margin loan? I guess this would be like doubling up on your gearing?
Also, is it possible to use a margin loan to buy stock and then margin loan against it again? EXAMPLE: Say i have given some managed funds to commsec as security and get a margin loan for $30k. I then buy 1,000 BHP shares at $25 which means my margin loan is now in arrears for $25k. But because these BHP shares are being held by commsec as security, does that mean i can then borrow 70% of the value of those BHP shares being an extra $17,500 (25000 * 70%)?