Margin Loan Calculator
Model leveraged investment returns, total interest cost, LVR, and your margin call trigger point.
| Total Interest Cost | $0 |
| Net Profit Difference | $0 |
| Starting LVR | 0% |
| Margin Call Trigger (portfolio drop) | — |
How Margin Lending Works
A margin loan lets you borrow against your existing investments or cash to invest a larger total amount. If you have $50,000 and borrow another $50,000, you invest $100,000 — doubling your exposure. If the investment grows 10%, your $100,000 becomes $110,000. After repaying the $50,000 loan, you keep $60,000 — a 20% return on your $50,000 own funds.
The same leverage works in reverse. A 10% loss on a $100,000 portfolio leaves $90,000 — but after repaying the $50,000 loan, you only have $40,000 — a 20% loss on your own funds.
A worked example
$100,000 of your own money plus $100,000 borrowed at 7.5%, invested at 8% for five years. The geared position ends at $156,366 against $146,933 ungeared — +$9,433 for the risk, at a starting LVR of 50.0%, with a margin call landing on a 28.6% drop.
Margin Call Risk
Lenders set a maximum LVR (typically 70% for diversified blue-chip portfolios). If the portfolio falls in value so that the loan-to-portfolio ratio exceeds 70%, the lender issues a margin call — you must restore the LVR within 24 hours by depositing cash or selling assets. This can force you to crystallise losses at the worst possible time.
When Does Leverage Make Sense?
Leverage adds value only when the investment return exceeds the interest rate. With an 8% return and 7.5% interest rate, the margin is slim — and requires the investment to consistently outperform. In flat or falling markets, you pay interest with no offsetting return. Leverage is best suited to long-term investors in higher tax brackets who can deduct interest costs.