Q: I am looking to borrow to invest. Can you give me feedback on the NAB Equity Builder loan facility?
A: The NAB Equity Builder is a Principal and interest loan facility that investors can use to invest in a broad range (950+) of approved Managed Funds, Exchange Traded Funds, Listed investment Companies and Separately Managed Accounts.
The minimum loan facility amount is $10,000 and the maximum loan amount is subject to your income, assets and credit record.
Loan terms can vary from 3 to 10 years. Loan repayments are made on a monthly basis with the ability to make additional repayments at any time.
Investors are not obliged to fully draw on the loan facility at commencement but can draw on the loan facility to build their portfolio over time.
Gearing levels for investments range from between 70-90%. NAB takes security over the investment assets and the borrower provides a personal guarantee for the loan. Assets may be sold by investors to reduce or discharge any loan liability at any time.
One of the unique features of the facility is that there is no Marginal call if the value of the assets falls. Your obligation is to meet your minimum monthly principal and interest repayments. Presumably this recognises the obligation to choose from a range of approved professional fund managers.
The standard variable rate charged on the facility is 5.9% p.a however NAB currently have a discount rate of 3.9% p.a. This rate will apply for the life of the loan or until NAB withdraws or varies the offer.
NAB Equity Builder is ideally suited to investors prepared to accept investment risk, with good cashflow and earning stable reliable income. It is an attractive option to those who do not have access to equity off a home loan.
As with any loan, there are risks to be considered; capacity to borrow, personal cashflow, continuity of income and general market risks.
Discuss the suitability of this facility with your Financial adviser or contact NAB direct on 1300 135 145.