Margin Interest Calculator
Calculate the cost of borrowing funds for margin trading and leveraged investments
Calculate Margin Interest
The principal amount borrowed from your broker for margin trading
Annual percentage rate charged by your broker
Duration for which funds are borrowed (0 days total)
Margin Interest Results
Formula: Margin Interest = Amount Borrowed × Interest Rate × (Days ÷ 360)
Calculation: $0 × 0% × (0 ÷ 360) = $0.00
Daily Rate: 0.000000% per day
Cost Analysis
Example Calculation
Margin Trading Example
Amount Borrowed: $3,000
Interest Rate: 5% annually
Holding Period: 30 days
Broker Convention: 360-day year
Step-by-Step Calculation
1. Principal amount: $3,000
2. Annual rate: 5% = 0.05
3. Time fraction: 30 days ÷ 360 days = 0.0833
4. Margin Interest = $3,000 × 0.05 × 0.0833
Result: $12.50 margin interest
Additional Insights
• Daily interest: $0.42 per day
• Monthly cost: $12.50 (for 30-day period)
• Annual cost: $150 (if held for full year)
• Cost as % of position: 0.42% for 30 days
Margin Trading Basics
Borrowing Funds
Borrow money from broker to buy securities
Leverage increases buying power
Interest Charges
Pay daily interest on borrowed amount
Calculated daily, billed monthly
Margin Calls
Maintain minimum equity requirements
Forced liquidation if unable to meet
Interest Rate Factors
Base Rate
Federal funds rate + broker spread
Account Size
Larger accounts often get better rates
Market Conditions
Rates fluctuate with market volatility
Borrowed Amount
Higher amounts may qualify for rate tiers
⚠️ Risk Warning
Margin trading amplifies both gains and losses
Interest costs reduce overall returns
Forced liquidation possible during margin calls
Daily interest accumulates over time
Monitor positions and interest costs regularly
Understanding Margin Interest
What is Margin Interest?
Margin interest is the cost of borrowing funds from a broker to purchase securities. When you trade on margin, you're essentially taking a loan from your broker, which comes with interest charges that accrue daily and are typically billed monthly.
How It Works
- •Interest is calculated daily using a 360-day year convention
- •Charges begin immediately when you borrow funds
- •Interest compounds if not paid promptly
- •Rates vary by broker and account size
Formula Breakdown
Margin Interest = Principal × Rate × (Days ÷ 360)
- Principal: Amount borrowed from broker
- Rate: Annual interest rate (as decimal)
- Days: Number of days funds are borrowed
- 360: Standard financial year convention
Important: Most brokers use a 360-day year for interest calculations, which slightly increases the effective daily rate compared to a 365-day year.
Trading Considerations
Cost Management
- • Factor interest costs into profit calculations
- • Consider shorter holding periods for borrowed positions
- • Monitor daily interest accumulation
- • Pay down margin balances when possible
Risk Management
- • Maintain adequate account equity
- • Set stop-loss orders to limit downside
- • Diversify margin positions
- • Have cash available for margin calls
Broker Rate Comparison
| Account Balance | Typical Rate Range | Example Monthly Cost* |
|---|---|---|
| $0 - $25,000 | 7% - 11% | $14.58 - $22.92 |
| $25,001 - $100,000 | 6% - 9% | $12.50 - $18.75 |
| $100,001+ | 4% - 7% | $8.33 - $14.58 |
*Based on $2,500 borrowed for 30 days