Understand risks in the margins

Investors considering a margin loan should read the find print and ensure they understand their obligations. If the value of the share portfolio falls the lender can make a margin call which requires an injection of funds through cash, realising a capital loss or selling large amounts of stock. When applying up for a margin loan the borrower loses their rights under the Consumer Credit Code so lenders are within their rights to seize assets other than stocks to cover required repayments. When a margin call is made investors have to clear the position by around 2pm the following day and if a loan is completely called in there is usually 10 to 14 days allowed to pay it out.

Source: The Australian Financial Review

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