How margin loan interest works
Many margin loans don't have a fixed repayment schedule; interest is charged on whatever you owe. This calculator shows the cost if you repay in equal monthly instalments over a set term, which is a useful way to compare.
Interest is worked out each month on the balance you still owe, at one twelfth of the annual rate. Early payments are mostly interest; as the balance falls, more of each payment repays the loan.
Worked example
Borrowing £50,000 at 7% and repaying over 5 years costs £9,403.60 in interest.
The risk
If your investments fall in value, the lender can ask you to add money or sell some of your holdings. Your investment returns need to beat the interest for the borrowing to pay off.
Inputs for the margin loan interest calculator
Amount to borrow
The amount you want to borrow.
Interest rate (per year)
The annual interest rate on your loan. The rate shown is only an example, so enter the rate from your quote.
Term
How many years you'll repay over. A longer term means paying interest for longer.
CALCULATOR QUESTIONS
Margin loan interest calculator questions
How is margin loan interest charged?
Usually on the balance you owe, often calculated daily. This calculator assumes monthly repayments over a fixed term.
Is borrowing to invest worth it?
Only if your returns exceed the interest, and losses are magnified if prices fall.
What is a margin call?
A demand to add money or securities when your investments fall below the lender's limit.
Why do I pay more interest at the start?
Interest is charged on the balance you owe, which is highest at the start. As you repay, it falls and so does the interest.