Personal Loans

Because they're typically easier to access and can have lower interest rates, margin loans are becoming an increasingly popular part of individual financial strategies. After you've been approved for a margin account, you can borrow against your marginable assets without extra paperwork, credit checks or approvals and use the funds to meet your personal needs.

When you borrow funds on margin, it's important to realize that the funds you borrow use the equity in your account as collateral. Throughout the duration of your loan, you're required to maintain a minimum equity level based on the amount you borrow. If your account drops below this equity level, a maintenance call will be issued requiring you to repay a portion or the total amount of your loan immediately.

6 Margin-to-Traditional Loan Comparisons

Margin Loan

Traditional Loans

Interest Rates

Determined by the amount you borrow; typically borrowing more results in lower interest rates

Determined by your credit score; lower credit scores may result in higher interest rates

Accessibility

Once you're approved for a margin account, you can easily access the funds available for borrowing at any time

You will need to be approved for a loan before you can borrow funds

Repayment Time Period

Loan can be repaid at a schedule you determine as long as you maintain the required account equity level

Loan is typically repaid on a monthly schedule

Minimum Payment Amount

No minimum monthly payments as long as you maintain the required account equity level

Minimum monthly payment is determined based on the amount you borrow

Collateral

You're in control of the amount you have available for borrowing; amount is based on the equity in your account

Amount available for borrowing is determined by the loan provider; credit limit can potentially be increased upon request

Repayment Requirements

Margin loans require you to maintain a minimum equity level in your account; if you fall below that level, a maintenance call will be issued requiring you to repay a portion or all of your loan immediately; if you're unable to meet the maintenance call, Scottrade may liquidate some or all of your securities until the call is satisfied

When you default on a typical loan payment, you will be charged a late fee and subject to accrued interest fees; If you continue to default on payments, your credit line may be revoked

Ways to Use Margin Loans

When used as a personal loan, the funds borrowed from a margin account can be applied to any of your individual financial needs.

  • Making Purchases – Instead of closing positions to access cash, margin loans offer you a way to maintain your market exposure and still withdraw funds that can be applied to material purchases, bills or other expenses.

  • For Outside Investments – Similar to a home equity line of credit, you can borrow from your margin account to cover unexpected expenses, real-estate investments, home improvements or similar investments outside your brokerage account.

When you use a margin loan to meet your personal financial needs, remember that the amount you have available to borrow is dependent upon the equity level of your account. If you fall below the minimum account equity requirement, a maintenance call will be issued requiring you to repay some or all of your loan amount immediately. For this reason, it's important to use margin responsibly and make sure you're prepared to meet extreme changes in the market.

Read “Four Tips for Managing Risk” to learn about ways you can address margin risk in your portfolio and use your loan responsibly.

This article is for information purposes only and use of strategies does not guarantee a profit. None of the information provided should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security. Investors should fully research any security or account type before making an investment decision. Scottrade's margin agreement is available at scottrade.com, or through a Scottrade branch office, and contains the Margin Disclosure Statement and information on our lending policies, interest charges, and the risks associated with margin accounts.

The information and content provided in the Scottrade® Knowledge Center is for informational and/or educational purposes only. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product or an endorsement or affirmation of any specific investment strategy. You are fully responsible for your investment decisions. Your choice to engage in a particular investment or investment strategy should be based solely on your own research and evaluation of the risks involved, your financial circumstances and your investment objectives. Scottrade, Inc. and its affiliates are not offering or providing, and will not offer or provide, any advice, opinion or recommendation of the suitability, value or profitability of any particular investment or investment strategy.