Margin Interest

Written by Michael Federico
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Margin interest is simply the interest that is charged when money is borrowed against a margin account. Having a margin account with a broker usually entitles a person to borrow money to purchase stocks and assets. Often money borrowed against a margin account can be used for other purposes as well. There are certain transactions, such as trading short, that usually require a person to have a margin account.

Margin trading is generally considered to be more risky than even standard trading. A person is still dealing with the unpredictability of the stock market, but he is doing it with someone else's money. The risk is amplified, because the borrower is not only responsible for repaying the loan, but he also is responsible for paying the interest on the loan.

Things to Know about Margin Interest before Borrowing

The amount of money a person borrows against his account will usually affect the amount of interest that will be charged. A person needs to know the exact rates he will be receiving on a loan before taking it out. Time can affect margin interest, as well. When borrowing, one needs to know if margin rates are fixed or change over time.

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