How do you calculate the interest?
When you use an M1 Margin Loan, interest will accumulate for each day that you use your portfolio line of credit.
The daily interest calculation utilizes the highest amount borrowed on any specific day as part of the
interest accrual. This means if you borrow multiple times within the same day or make a payment on your Margin Loan, the highest total borrowed amount for that day will be used.
Ex. Daily interest calculation for M1 Plus users: 7.25%/360 = .020139%
How am I billed?
Your bill will be available at the end of each month, and you will only need to pay for the line of credit borrowed.
When will I be charged?
You will be charged on the due date of your bill before the daily trade window. Here’s the order in which we automate interest repayment:
1. Cash balance: We always pull from the cash you keep in your account first if there is cash available.
2. Borrow additional funds: If your cash balance is insufficient and you have not maxed out your available credit, we will borrow more to cover the cost of your interest. We do this so you avoid having to sell securities from your portfolio and avoid taxable events. This also helps keep your loan on your schedule so you can repay it when it’s most convenient for you.
Margin Loan repayment
Traditional Margin Loans use an amortization schedule that includes a percentage of principal and interest.
With M1 Margin Loans, repayment of principal and interest are independent of one another.
A benefit of M1 Margin Loans is the flexible repayment schedule. We don’t require a minimum monthly loan repayment.
You can pay back any principal amount at any time.
Recurring deposits that are scheduled into your M1 Invest account will not repay your outstanding loan.
However, you can create a payback schedule by selecting: “Transfers” > “Move Money” > “Recurring Transfer” > input “Borrow” as the "To" account.
How is the M1 Margin Loan rate calculated?
The M1 Margin Loan rate is based on short-term interest rates and is subject to change if and when the Federal Reserve changes its target for the federal funds rate.
The M1 Plus membership includes a reduction on the M1 Margin Loan base rate. This reduction is effective immediately upon M1 Plus sign-up and will be reflected on the Margin Loan bill. You can learn more about M1 Plus here.
All investing involves risk, including the risk of losing the money you invest. Borrowing on margin can add to these risks, and you should review the M1 Margin Loan account risk disclosures before borrowing. M1 Margin Loan available on margin accounts with at least $2,000 invested. Not available for all account types including M1 Traditional IRA, M1 Roth IRA, M1 SEP IRA, M1 Custodial, and some M1 Trust Accounts. Margin Loan rates subject to change.