Margin loans at Schwab
Access the funds you need while maintaining your investment goals.
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.
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 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 "Margin & Options" under the Profile tab. For each eligible account, you will see a row for "Your margin line of credit" with a "Margin access added" 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.
Learn more about margin loans
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.