Margin loans at Schwab

Access the funds you need while maintaining your investment goals.

Margin is a flexible lending solution available to Schwab clients looking to purchase additional securities, or meet short-term borrowing needs. Margin is a feature that may be available on your brokerage account and if it is, you can start to borrow with as little as $2,000 in eligible securities at competitive interest rates. If not, then it's easy to apply.

So what is a margin loan? 

Margin works by allowing you to borrow against the eligible investments you already hold in your brokerage account, generally up to 50% of the value of those investments.

Similar to how a mortgage loan involves using the house as collateral, with a margin loan, Schwab would use your investments as collateral.

How can you use a margin loan? 

Margin loans can be used in a variety of ways. They can increase your purchasing power, as well as your trading flexibility, allowing you to act on market opportunities when you don't have enough cash on hand. 

But margin loans aren't just used for trading and investing. They can also be used for short-term personal or business needs, including unexpected medical bills, paying a tax bill, home or auto repairs, or other unanticipated short-term financial needs. 

Margin loans come with their own benefits and risks. 

Borrowing on margin can provide a number of advantages other borrowing solutions don't—like quick access to cash without having to sell your investments.

Margin loans can also be a cost-effective way to access cash or liquidity, often with interest rates lower than those for credit cards or unsecured loans.

There are potential tax benefits with margin. When you take out a margin loan without liquidating the securities in your portfolio, you may be able to defer capital gains taxes, or possibly deduct the interest against your net investment income. Be sure to consult your tax advisor about your specific financial situation.

Margin loans also have no repayment schedule as long as you maintain what is known as the margin minimum requirement, so you can pay at your own pace. 

There are risks associated with margin and it is possible to trigger a margin call if your account does not meet the minimum requirement and the value of your securities drop. 

If a margin call happens, you will want to deposit more cash or marginable securities into your account to meet the requirement. However, please note that Schwab will be allowed to sell securities without your prior approval in order to meet the margin minimum requirement. Make sure you understand the risks of using margin before obtaining a margin loan.

There are a number of things you can do to decrease the risk of a margin call: 

•    Keep your portfolio diversified. 
•    Borrow less than the maximum amount allowed, and consider setting your own personal maintenance level, above which you won't borrow. 
•    And monitor your portfolio often, especially since market fluctuations can reduce the value of your securities and increase the outstanding loan-to-collateral ratio in your account.

If you are interested in a margin loan and how it might be able to help you along your financial journey, call 1-877-752-9749 to speak with a Schwab Investment Specialist, or visit schwab.com slash margin for more details. 
 

Video Transcript

Margin Loans

Margin is a flexible lending solution available to Schwab clients looking to purchase additional securities, or meet short-term borrowing needs. Margin is a feature that may be available on your brokerage account and if it is, you can start to borrow with as little as $2,000 in eligible securities at competitive interest rates. If not, then it's easy to apply.

So what is a margin loan? 

Margin works by allowing you to borrow against the eligible investments you already hold in your brokerage account, generally up to 50% of the value of those investments.

Similar to how a mortgage loan involves using the house as collateral, with a margin loan, Schwab would use your investments as collateral.

How can you use a margin loan? 

Margin loans can be used in a variety of ways. They can increase your purchasing power, as well as your trading flexibility, allowing you to act on market opportunities when you don't have enough cash on hand. 

But margin loans aren't just used for trading and investing. They can also be used for short-term personal or business needs, including unexpected medical bills, paying a tax bill, home or auto repairs, or other unanticipated short-term financial needs. 

Margin loans come with their own benefits and risks. 

Borrowing on margin can provide a number of advantages other borrowing solutions don't—like quick access to cash without having to sell your investments.

Margin loans can also be a cost-effective way to access cash or liquidity, often with interest rates lower than those for credit cards or unsecured loans.

There are potential tax benefits with margin. When you take out a margin loan without liquidating the securities in your portfolio, you may be able to defer capital gains taxes, or possibly deduct the interest against your net investment income. Be sure to consult your tax advisor about your specific financial situation.

Margin loans also have no repayment schedule as long as you maintain what is known as the margin minimum requirement, so you can pay at your own pace. 

There are risks associated with margin and it is possible to trigger a margin call if your account does not meet the minimum requirement and the value of your securities drop. 

If a margin call happens, you will want to deposit more cash or marginable securities into your account to meet the requirement. However, please note that Schwab will be allowed to sell securities without your prior approval in order to meet the margin minimum requirement. Make sure you understand the risks of using margin before obtaining a margin loan.

There are a number of things you can do to decrease the risk of a margin call: 

•    Keep your portfolio diversified. 
•    Borrow less than the maximum amount allowed, and consider setting your own personal maintenance level, above which you won't borrow. 
•    And monitor your portfolio often, especially since market fluctuations can reduce the value of your securities and increase the outstanding loan-to-collateral ratio in your account.

If you are interested in a margin loan and how it might be able to help you along your financial journey, call 1-877-752-9749 to speak with a Schwab Investment Specialist, or visit schwab.com slash margin for more details. 
 

What is margin?

Margin lending is a flexible line of credit that allows you to borrow against the securities you already hold in your brokerage account. 

When used correctly, margin loans can help you execute investment strategies by increasing your borrowing power to purchase more securities. It can also serve as a source of flexible borrowing for other short-term financial needs. 

View our Schwab Guide to Margin to learn more. 

What are the uses of margin?

Investing and trading

Margin loans can increase your trading flexibility, allowing you to act on market opportunities when you don't have enough cash on hand. 

Example: Dan is an investor who closely follows the technology sector. His research showed that a tech stock trading at $10 a share has upside profit potential. With only $1,000 of uninvested cash remaining in his account, Dan was able to purchase 200 shares on margin rather than just 100 shares if he had used cash.

Short-term financial needs

A margin loan may be an attractive solution to meet short-term financial needs that are not related to investing.  

Example: After injuring his leg while skiing, Mark needed surgery. Having fully invested his portfolio earlier in the year, he didn't want to liquidate his recently purchased shares to pay for this unexpected medical expense. After exploring other financing options, Mark determined that a short-term margin loan would be the best option.  

The amount that can be borrowed is determined by the security type and security requirements. Margin rates are determined by the amount of the loan taken. 

View rates and requirements Understand the risks

How do margin loans work?

Depending on the type and value of securities in your account, brokerage clients who are approved for margin use can use it to potentially purchase additional shares of securities than could be purchased using the available cash in the account. However, the more you borrow, the more risk you take on. Interest accrues daily and your rate depends on your loan balance and your broker's base rate. To begin borrowing at Schwab, your account must contain at least $2,000 in cash or marginable securities. View more important information about margin loan requirements at Schwab.

To better understand how margin loans work, let's take a look at a hypothetical example showing both gain and loss scenarios, with and without margin. (For simplicity, we've excluded trading fees, taxes, and interest.)

You purchase 100 shares of a stock at $50 for a $5,000 total investment. If the value of the stock you bought goes up to $70 and you decide to sell, your portfolio is worth $7,000 and you gain $2,000. 
 
If you purchase an additional 100 shares by borrowing on margin, your total portfolio is now worth $10,000. With the 100 additional shares you bought on margin, your total portfolio is worth $14,000 (200 total shares times $70 price). If you decide to sell at this point, you still have to pay back the $5,000 loan, but your gains would be $2,000 more than if you had only used your money instead of margin. 

Profit without margin: $2,000
Profit with margin: $4,000

If the value of the stock you bought drops from $50 to $30 and you decide to sell, your portfolio is worth $3,000 and you lose $2,000. 

If you purchase an additional 100 shares by borrowing on margin, your total investment is $10,000. With the 100 additional shares you bought on margin, your total portfolio is worth $6,000 (200 total shares times $30 price). If you decide to sell at this point, you still have to pay back the $5,000 loan, leaving you with $1,000 and a $4,000 loss. 

Loss without margin: $2,000
Loss with margin: $4,000

Why trade margin with Schwab?

Trusted education

Access educational resources to learn more about margin and how it might fit into your investing strategy.

Competitive rates

Our competitive margin interest rates can make margin borrowing more cost-effective than other lending options like personal or unsecured loans.

Flexible payment schedule

There is no set repayment schedule as long as you maintain the required level of equity Tooltip  in your account.

All in one place

As a Schwab client, you can manage your margin loan alongside your investments and other finances in a single, convenient location.

Get started with margin in three simple steps.

Open a brokerage account

Open an account online, call us at 866-232-9890, or visit one of 300 local branches

Apply for margin

Log in and from Profile > click Margin & Options to "Apply for margin."

Tap into available funds

Once approved, you can tap into your available funds at any time by placing a trade, writing a Schwab One® check, placing a wire transfer, requesting a check, or using your Schwab One Visa® Platinum debit card. No additional forms or applications are required.

Common questions

Log in to your account and click on "Account Settings" under the Service tab. For each eligible account, you will see a row for "Margin borrowing" with a "Yes" or "No" to indicate if margin is enabled. If it is not, there will be a link allowing you to apply for margin. 

  • Most stocks traded on major U.S. exchanges priced above $3 per share
  • Most NASDAQ-listed securities priced above $3 per share 
  • Most mutual funds, provided they've been held for at least 30 days
  • Most corporate, Treasury, municipal, and government agency bonds

Please note that some assets are not considered collateral for margin borrowing, including penny stocks, money market funds, certificates of deposit (CDs), annuities, and options. Schwab clients can check if securities you own are marginable by using Schwab's Margin Requirement Lookup Tool found on Buying Power Detail. 

Once your Schwab brokerage account is approved for margin, you can tap into your available funds simply by placing a trade, writing a Schwab One® check, placing a wire transfer, requesting a check, or using your Schwab One Visa® Platinum debit card.

Your interest rate depends on your loan balance and Schwab's base rate. Interest accrues daily and is posted monthly.

Before you begin using margin, you should read Schwab's Margin Borrowing Overview and Disclosure Statement.

There is no minimum loan amount; however, to begin margin borrowing against securities in a Schwab brokerage account, you need at least $2,000 in cash or marginable securities. View more details on Schwab's margin loan requirements.

No, Schwab does not charge clients a fee for setting up a margin loan.

Borrowing on margin may help mitigate tax consequences because staying invested and not liquidating securities may help avoid unnecessary taxes. Also, interest on margin loans may be tax deductible but is limited to your net investment income. Consult your tax advisor for more information.

Ready to start investing?

Open a Schwab One Brokerage account and apply to add margin.

Already a Schwab client?
Log in and find out if your account is enabled for margin.