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What is a sweep account?

5 July 2016 |Loan management
Learn how unlocking the value of your investment portfolio using a margin loan can help build wealth and achieve your financial goals on a chart background.

What is a sweep account?

5 July 2016 |Loan management

If you’ve fixed your loan, but haven’t drawn down all the funds, you might be paying interest on a loan that’s not being used.

While you decide what to invest the remainder of your loan in, you can transfer the funds to an interest-bearing bank account to help offset the interest you’re paying.

When does this happen?

You might find yourself in this situation if you’ve just set up your loan, you’ve sold stock or you’ve made another credit to your loan.

How do I set it up?

So you don’t have to manage this manually each time, we can automatically sweep the funds between your loan and your interest bearing bank account as required. To set this up, choose your desired loan balance (also known as Target Facility Balance) and complete the Sweep Account Request form.

Here's an example

Jess has a margin loan balance of $80,000. She intends to increase the loan by $20,000 to make additional investments as well as fix and prepay the interest on the loan.

She decides to fix the interest rate and prepay the interest for a loan of $100,000, with a start date of 28 June. Therefore, on June 29, her loan balance is still $80,000, with $20,000 undrawn.

Jess has set up her loan so that the $20,000 sweeps into her linked deposit account. The $20,000 now earns interest while Jess decides what to invest in.

In July, Jess purchases $20,000 of investments, settling on July 20. Upon settlement, the available $20,000 in the deposit account sweeps back to fund the purchases.

In September, $4000 of dividend payments are credited to Jess’ loan. The $4000 is swept into her linked deposit account to earn interest

This information is correct as at 5 July 2016.

Gearing involves risk. It can magnify your returns; however, it may also magnify your losses. Issued by Leveraged Equities Limited (ABN 26 051 629 282 AFSL 360118) as Lender and as a subsidiary of Bendigo and Adelaide Bank Limited (ABN 11 068 049 178 AFSL 237879). Information is general advice only and does not take into account your personal objectives, financial situation or needs. The views of the author may not represent the views of the broader Bendigo and Adelaide Bank Group of companies (“the Group”). This information must not be relied upon as a substitute for financial planning, legal, tax or other professional advice. You should consider whether or not the product is appropriate for you, read the relevant PDS and product guide available at www.leveraged.com.au, and consider seeking professional investment advice. Not suitable for a self-managed superannuation fund.

Examples are for illustration only and are not intended as recommendations and may not reflect actual outcomes. Past performance is not an indication of future performance. The information provided in this document has not been verified and may be subject to change. It is given in good faith and has been derived from sources believed to be accurate. Accordingly no representation or warranty, express or implied is made as to the fairness, accuracy, completeness or correction of the information and opinions contained in this article. To the maximum extent permitted by law, no entity in the Group, its agents or officers shall be liable for any loss or damage arising from the reliance upon, or use of the information contained in this article.

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