ADVANCED STRATEGIES • STEP 3 OF 4
Try It: Run Your Numbers
In God we trust, all others must bring data.
W. Edwards Deming
The calculator computes both paths side by side, with the same formula, from the numbers you enter.
Your Learning Journey
Your Learning Journey
This Step Takes: 15 minutes
Enter your own numbers and see the outcome of borrowing and of selling over the same period.
What You'll Do
Use the calculator, see typical loan terms by asset, and read how collateral loans behave when prices move.
Borrow vs Sell Calculator
Enter your numbers to see the full cost of each path over time.
Your Situation
What your Bitcoin/gold/stocks are worth today
What you originally paid for the asset
How much cash do you need?
Your income tax bracket
Assumptions
Typical: 5-15%
Your conviction: will it grow?
How long to compare?
Path A: Sell
Path B: Borrow
Net wealth difference
Path B minus Path A after 5 years with these inputs: $78,749
Net wealth = asset value at the end - loan still owed - interest paid - CGT paid on sale. A lower growth rate or a higher interest rate changes the sign. This is an educational example, not a recommendation.
Assumptions: (1) 50% CGT discount applied (held >12 months), (2) Interest-only loan, (3) No tax deductions for interest (adjust if investment purpose), (4) Compound growth at stated rate
Loan Types by Asset
Typical terms seen in Australia, grouped by the asset you borrow against. Terms change; check them with any lender.
| Loan type | Asset | LTV | Interest Rate |
|---|---|---|---|
| Crypto-backed loan | BTC, ETH, other coins | 20-50% | 8-15% |
| Metals-backed loan | Vaulted gold/silver | 50-70% | 6-10% |
| Margin loan | ASX and US stocks, ETFs | 50-95% | 5-10% |
| Home equity loan (HELOC) | Property | Up to 80% | 5-7% |
How Collateral Loans Behave
Mechanics that set the cost and the liquidation risk
1.Starting LTV and Price Falls
The price fall that takes a loan from its starting LTV to the lender's threshold is 1 − (starting LTV ÷ threshold). With a 70% threshold: from 30% LTV, a fall of about 57%; from 50% LTV, a fall of about 29%.
2.LTV Moves With the Price
Collateral value follows the market price, so the LTV changes whenever the price does. Lenders typically issue a margin call as the LTV nears the threshold; meeting it takes added collateral or a part repayment.
3.Interest Accrues Either Way
Interest is payable whether the asset rises or falls. Where a lender adds unpaid interest to the loan, the balance and the LTV both rise over time.
4.Interest-Only vs Principal and Interest
An interest-only loan keeps the balance constant. A principal-and-interest loan reduces the balance with each payment and has higher repayments.
5.Liquidation Terms Differ
Some lenders sell collateral as soon as the threshold is reached; others allow a period, such as 24 to 48 hours, to add collateral. The loan agreement sets this out.
6.Leverage
Borrowing to buy more of an asset amplifies gains and losses on the borrowed amount, and the interest is payable in both cases.
Borrow Strategy - Try It: Complete
- The calculator applies the same formula to both paths; the difference between them depends on the asset growth rate, the interest rate and the CGT on the units you would sell.
- Key variables: loan amount, interest rate, asset growth rate, your marginal tax rate, and holding period.
- A lender liquidation is a CGT event, so a price fall can bring forward the CGT that borrowing deferred.
Homework
Which input changed the difference between the two paths the most? What assumptions did you use?
Run the calculator at a negative growth rate, at 0%, and at two positive rates. Note how the difference between the two paths changes each time.
What's Next?
10 minutes