investingsimple logo
Menu

M1 Borrow Review 2020: Best Money Lending Tool?

FTC Disclosure: Some of the links on this site are affiliate links, which means that if you choose to make a purchase, we may receive a commission. This commission comes at no additional cost to you.
Written by Matthew Cerminaro
Updated on July 12, 2020
M1 Borrow Review
  • Fees
  • Ease Of Use
4.3

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

Reasonable interest rates (Better with M1 Plus)

Easy to apply for the loan

No pre-payment penalties

Cons

$10,000 M1 Finance account minimum

Interest rates vary

Risk sale of assets during a maintenance call

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 Borrow: Summary

  • M1 Borrow offers competitive lines of credit at industry-low interest expenses
  • Flexibility in repayment schedule adds to the quality of the M1 Borrow feature
  • Minimum taxable account value of $10,000 to access M1 Borrow  
  • Easily navigable mobile application adds to the ease of submitting a loan request
  • Responsive customer support line available on market trading days from 9:30 AM – 4:00 PM
  • Tax deductibility options on loan repayments and taxes on capital gains
  • While maintenance calls prevent accounts from going negative, they also force liquidation processes that may automatically sell investments
  • M1 Plus offers rates as low as 2% on lines of credit for M1 Borrow
  • Variability in the federal funds rate makes interest charges unpredictable and potentially volatile

M1 Finance Smart Borrow

What Is M1 Borrow?

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 3.50% interest rate.

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.

Features of M1 Borrow 

Mobile Application

The most prominent feature of M1 Finance and its My Borrow feature that it its 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 later in the article). It is crystal clear for both experienced investors and people who are new to the investing game.

M1 Borrow Eligibility

 To be qualified for M1 Borrow usage, you need to have a minimum of $10,000 in a taxable brokerage account. This makes M1 Borrow’s feature ideal for medium-larger sized clients and if you fit into that category, it may be a great option.

Automatic Enrollment

 M1 Finance makes it easy for clients to access the M1 Borrow feature of its platform, since accounts that meet minimum requirement are automatically enrolled. You will not need to enroll through a long and extensive application process. M1 Finance makes it easy!  

Tax Deductibility

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.

Customer Support

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.

M1 Borrow Risks

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.

M1 Plus

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 3.50%, bringing the line of credit interest charges to only 2% for M1 Plus users. But this account does not come free!  

 Step by Step: Initiating A Borrow Request

  1.  Navigate to the Borrow tab and click on the “Borrow” button.    
  2. Here, you can fill out and complete all of the details of borrow request including the amount that you want to borrow and where you want to send the money funds.    
  3. After completing this section, you can review the details of your request on a transfer summary page. After you take a look at your info and make sure it is accurate, you can click “confirm.” The transfer will now be pending.   
  4. Transfers typically take a few business days. You can view pending/previous transfers under the “Transfers” tab.

M1 Borrow Fees

M1 Plus

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 Expense

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.

Interest Rate Right Now

Right now, the interest rate on a line of credit from M1 Borrow is 3.50%, which is highly competitive and an industry low in interest charges on credit.

How Does M1 Charge Interest?

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.

Maintenance Call

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.

M1 Finance Borrow Risks

M1 Borrow Pros

  • Interest expenses as low as 2% for M1 Plus and 3.50% on traditional accounts for lines of credit
  • You can take out a loan simply and easily on the app
  • Borrowers can set flexible repayment schedule within the indenture
  • M1 Borrow will give you automatic enrollment if your account meets a minimum
  • Investors have given positive ratings to customer support and its availability during regular market trading hours
  • Because M1 Finance is an SEC-registered broker, they are highly regarded and under surveillance by the securities exchange commission
  • If you repay lines of credit early, you will not incur any penalty
  • Interest expenses on lines of credit can offset taxes on investment gains

M1 Borrow Cons

  • Minimum taxable account value of $10,000 to enroll in M1 Borrow
  • Interest rates on lines of credit are variable depending on the federal funds rate
  • Maintenance calls may result in forced sales of assets to meet a 30% equity threshold
  • Common risks associated with investing on borrowed money are still present in this feature

The Final Verdict: M1 Borrow 

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 low-interest rates on its lines of credit make M1 a win-win.

M1 Finance Borrow Review
Ready To Learn About Investing?
Subscribe to the Investing Simple Newsletter!
We respect your privacy. Unsubscribe at any time.
TAGS:

Power Your Investing

Choosing the right product and service is essential for your investing. Here are some of the tools and services to help your portfolio grow.
Stock Rover
From stock screening and charting, to investment research and portfolio construction, Stock Rover provides a robust all-in-one platform for the do it yourself investor.
Try Stock Rover
Betterment
The smart money manager.
Betterment provides investment management and access to financial planners. Basic plans start at a 0.25% annual fee.
Try Betterment
Fundrise
Passively invest in private real estate deals with as little as $500. Fundrise allows you to own residential and commercial real estate across the U.S. starting at a 1% annual fee.
Try Fundrise
© Copyright 2018 - 2020 Investing Simple LLC. All Rights Reserved. Investing Simple is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that investment markets have inherent risks, and past performance does not assure future results. Investing Simple has advertising relationships with some of the offers listed on this website. The information on Investing Simple could be different from what you find when visiting a third-party website. All products are presented without warranty. For more information, please read our full disclaimer.
Developed by Stallion Cognitive
envelopemagnifiermenucross-circlechevron-down-circle
>
Copy link