Margin Interest Adds Up Fast, Even on a Short-Term Loan
Buying stock on margin means borrowing cash from your broker, and that loan always carries interest. Interest is calculated by multiplying the amount you borrowed by the annual rate, then prorating it for the exact number of days you actually hold the loan. A single day's interest looks tiny, but stack up several days or weeks and it becomes a real fixed cost that eats into your returns. Many brokers also use a tiered rate schedule, where the rate climbs the longer you hold the balance, so the cost of staying on margin can grow the longer you wait.
How It's Calculated
| Item | Formula |
|---|---|
| Total interest | Amount x annual rate x (days / 365) |
| Daily interest | Amount x annual rate / 365 |
| Effective rate | Total interest / amount x 100 |
For example, borrowing $10,000 at 8% APR for 30 days costs about $65.75 in interest, an effective rate of roughly 0.66% for the period. If the stock doesn't rise by at least that much, the interest alone can turn a winning trade into a loss, so it helps to know your interest cost before you set a target return. Also remember that if your equity falls too far, brokers can force-sell your position through a margin call, so interest cost is only part of the risk to plan for.
Frequently Asked Questions
Multiply the borrowed amount by the annual rate and prorate it for the days held, divided by 365. $10,000 at 8% for 30 days costs about $65.75.
Rates are often tiered, rising with your loan size, and typically run 5-10% APR depending on the broker. Check your broker's current schedule first.
You'll get a margin call and may need to add cash or have positions sold automatically. This calculator estimates interest only, not margin call risk.
* Actual rates and tiers vary by broker and account type; this is an estimate for reference only.