Summary
Overall, M1 Borrow has several strengths that make it a top competitor in the marginal trading industry. With extremely competitive interest rates on lines of credit, M1 Finance is staying committed to breaking down the entry barriers for investors big and small by offering up high-quality features such as M1 Borrow.
If you are interested in leveraging up your positions by taking out lines of credit, I recommend this is worth exploring. M1 Finance is a great option because of its easy access.
You won't need to go through a ton of paperwork or do a long application for an in-depth indenture. The feature is automatically available if your account meets the minimum guidelines. If you're an investor interested in accessing margin, the market low-interest rates on its lines of credit make M1 a win-win.
Pros
Cons
We all have investment goals and aspirations, and that's a good thing! None of us want to sit idly by when we can start growing wealth through investing.
But investors big and small often run into trouble when they lack liquidity (cash), and sometimes turn to lines of credit from brokers or banks in exchange for interest.
M1 Finance is answering the call by implementing its newest feature, M1 Borrow. M1 Borrow now offers competitive interest rates on lines of credit to clients.
This is a comprehensive review of the new M1 Borrow feature, including key information on the key aspects, fees, pros, cons, and finally a final verdict including some of my thoughts on the new feature.
M1 Finance is an SEC-registered broker-dealer that specializes in money management for clients.
You can read our full review of M1 Finance here.
Its newest feature, M1 Borrow, is up and running to provide the lowest and most competitive interest rates on lines of credit to investors. For instance, M1 Borrow is offering lines of credit up to 35% of your investment portfolio at a 5.0% interest rate (3.5% for M1 Plus members).
M1 Borrow is working to change the way traditional banks and other brokerage services do business. They do this through their easy-to-access, non-traditional lending structure.
The most prominent feature of M1 Finance and its My Borrow feature is that the IOS application is easy to access. If you want to take out a loan, just whip through a simple 4-step process (I will discuss it later in the article). It is crystal clear for both experienced investors and people who are new to the investing game.
To be qualified for M1 Borrow usage, you need to have a minimum of $5,000 in a taxable brokerage account. This makes M1 Borrow’s feature ideal for medium and larger-sized clients. If you fit into that category, it may be a great option.
M1 Finance makes it easy for clients to access the M1 Borrow feature of its platform as accounts that meet the minimum requirements are automatically enrolled. You will not need to enroll through a long and extensive application process. M1 Finance makes it easy!
M1 Borrow offers tax-deductible initiatives against capital gains on investments. Taxes on dividends are treated as income. You can use the interest that is charged to take out a line of credit to pay the tax on that dividend.
You can reach M1 Finance’s customer support line at 312-600-2883. The line is available from 9:30 AM – 4 PM ET Monday-Friday.
Essentially, customer support is available whenever the market is open, so if you have any immediate questions about M1 Borrow that will be the time to call.
Keep in mind, you will encounter more risks when you use margin to leverage up trades.
Investors have the potential to lose out if an investment goes south. They will also have to pay back the margin used to buy into that investment. You should always be careful to avoid this double whammy by using sound risk management initiatives.
Also, fed funds rate variabilities may cause a hit on interest rates.
The paid version of the traditional M1 Spend account, M1 Plus, offers interest incentives through M1 Borrow.
There is an automatic 1.50% reduction from typical interest charges of 5%, bringing the line of credit interest charges to only 3.5% for M1 Plus users. But this account does not come free!
This offers interest expense incentives on lines of credit, but has a flat cost of $125 to sign up. This may seem like a big hit to your wallet to sign up for an account.
But if you are an investor looking to use margin in most trades, then the interest incentive offered through M1 Plus for M1 Borrow may save you money in the long run.
M1 Borrow interest expenses are variable to the Federal Funds Rate. The Federal Funds Rate changes based on the Federal Reserve’s decisions on their monetary policy.
Therefore, it is impossible to determine what interest rate M1 Borrow will be charging on its lines of credit.
Right now, the interest rate on a line of credit from M1 Borrow is 5%, which is highly competitive and an industry low in interest charges on credit.
At the end of each month, M1 calculates interest charges and takes them from your cash balance.
You can also create a payback schedule. With this preset payment schedule, you can control how much and when the payments will be made now, and in the future.
If your account value dips dangerously to a point where equity value is below the minimum maintenance threshold, M1 will auto-generate a maintenance call. This threshold is typically 30% of the total account value. You can offset losses by withdrawing more funds into the account, thereby preventing the need for a maintenance call.
Overall, M1 Borrow has several strengths that make it a top competitor in the marginal trading industry. With extremely competitive interest rates on lines of credit, M1 Finance is staying committed to breaking down the entry barriers for investors big and small by offering up high-quality features such as M1 Borrow.
If you are interested in leveraging up your positions by taking out lines of credit or using it for another expense, I recommend this is worth exploring. M1 Finance is a great option because of its easy access.
You won't need to go through a ton of paperwork or do a long application for an in-depth indenture. The feature is automatically available if your account meets the minimum guidelines. If you're an investor interested in accessing margin, the market's low-interest rates on its lines of credit make M1 a win-win.
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