M1 Finance offers a cash management account and loan functionality that competes favorably with banking services offered by other robo-advisor and online brokerage platforms.
M1 Borrow is a lending service that uses your existing account balance as collateral for loans. The service is available to users with an account balance of $5,000 or more and allows eligible users to borrow up to 35% of their total account balance. Borrowers can set their own repayment schedule and the funds can be used to buy more stocks and ETFs, or for any other purpose.
A distinctive feature of M1 Borrow is lower interest rates than similar margin loans from almost all competing online brokerage platforms. Users with M1 Basic accounts enjoy an annual interest rate of 3.5%, while M1 Plus members pay an annual interest of 2%, which exceeds margin loans from the online brokerage leader at low rate, Interactive brokers.
Although M1 Borrow is an inexpensive way to invest on margin and pay for other short-term expenses, like a wedding or vacation, without having to sell your investments at an inconvenient time. Just note that M1 retirement and custodial accounts are not eligible for loans.
The M1 Finance cash management account works like a regular checking account from a bank or other fintech platform. M1 Spend provides all users with one debit card and ATM fee rebate per month, while M1 Plus users get 1% cash back on all debit card purchases, the ability to send physical checks via M1’s app and three additional monthly ATM fee refunds.
Balances held in M1 Spend earn 1% APY if you are an M1 Plus user. M1 Basic users earn no APY on deposits.
Note that M1 Finance is not a bank. All M1 Spend account balances are held by Lincoln Savings Bank, which provides Federal Deposit Insurance Corp. (FDIC) on deposits up to the standard limit of $250,000.