Table Of Content
When You Can Borrow Against Stocks?
You can borrow against your stock portfolio when your holdings meet certain conditions — typically involving stability, liquidity, and account type:
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When You Hold Marginable Securities in a Brokerage Account
In order to borrow, your stocks must be marginable — meaning they're approved by your broker as eligible collateral.
For instance, blue-chip stocks like Apple or Microsoft are commonly accepted, whereas penny stocks or over-the-counter shares are usually excluded.
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When You Have a Margin Account, Not a Cash Account
A margin account is required because it allows borrowing against securities.
A cash account doesn't permit this. For example, if you're using a Robinhood margin account, you can borrow up to a percentage of your portfolio's value — often 50%.
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When the Market Value of Your Portfolio Exceeds Broker Limits
Brokers typically set a minimum balance — for example, $2,000 with most platforms — to activate margin.
But in practice, to borrow meaningful amounts, you might need at least $10,000 in marginable assets.
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When You Want Short-Term Liquidity Without Selling Your Investments
Borrowing allows you to access cash for opportunities like real estate down payments, tax bills, or business investments.
As a result, you avoid capital gains taxes because you’re not selling your stocks. This strategy is often used by high-net-worth individuals to free up liquidity while staying invested.
How to Borrow Against Stocks: 5 Key Steps
Borrowing against your stocks can offer flexible access to cash without selling your investments.
Here are five key steps to help you understand the process, requirements, and potential risks involved:
1. Open a Margin-Enabled Brokerage Account
To borrow against stocks, you must first have a margin account — not a standard cash account. This type of account allows you to use your stock holdings as collateral to access a line of credit.
Most brokers require a minimum of $2,000 in marginable securities to enable margin.
You must agree to a margin agreement outlining terms and risks.
The account must include eligible stocks (e.g., S&P 500 companies), not low-volume or volatile assets.
For example, someone with $20,000 in Microsoft and Apple shares might access up to $10,000 in borrowing power.
Broker | Annual Fees | Best For |
|---|---|---|
E-Trade | 0% – 0.35%
0% on stocks and ETFs in self directed brokrage, 0.35% for Core Portfolio Robo Advisor
| Options & Futures Trading |
Interactive Brokers | 0% – 0.75%
$0 online commission on U.S. listed stocks and ETFs, Options: $0.15 – $0.65 per-contract, Futures: $0.25 – $0.85 per-contract. For Interactive Advisors: asset-based management fees of 0.10% to 0.75% | Professional Trading Tools |
Fidelity | 0% – 1.04%
Fidelity Go® Robo advisor: $0: under $25,000, 0.35%/yr: $25,000 and above
Fidelity® Wealth Management dedicated advisor: 0.50%–1.50%
Fidelity Private Wealth Management® advisor-led team: 0.20%–1.04%
| Retirement Account Investing |
Vanguard | Up to 0.30%
$0 online commission on U.S. listed stocks, mutual funds and ETFs, options: $0.65 per-contract, Vanguard Digital Advisor – 0.015%, Vanguard Personal Advisor: 0.03%, Vanguard Personal Advisor Select: up to 0.03%, Vanguard Wealth Management: up to 0.03% | Low-Cost ETF Investors |
J.P. Morgan Self Investing | $0
$0 online commission on U.S. listed stocks and ETFs and $0.65 per-contract | Chase Bank Customers |
Charles Schwab | Up to 0.80%
$0 online commission on U.S. listed stocks, mutual funds and ETFs, options: $0.65 per-contract, Schwab Intelligent Portfolio – 0%, Schwab Intelligent Portfolios Premium – One-time planning fee: $300 + Monthly advisory fee: $30, Schwab Wealth Advisory: up to 0.80% | Advanced Trading Tools |
Merrill Edge | 0.45% – 0.85%
0.45% for Merrill Robo Advisor (Guided Investing), 0.85% for Investing With An Advisor | Bank of America Clients |
- The Smart Investor Tip
Choose a broker that allows partial liquidation instead of auto-liquidating your entire position during margin calls — it gives you more control.
2. Understand How Margin Loans Work
Once the account is set up, a margin loan works much like a secured line of credit. You’re borrowing money from the broker, using your stock portfolio as collateral.
You can typically borrow up to 50% of the portfolio’s value.
There’s no set repayment schedule — interest accrues monthly until paid.
You can use the borrowed funds for almost anything, except buying more marginable securities (unless using margin to trade).
Let’s say you borrow $5,000 against $10,000 in Tesla stock. You keep ownership of the stock, but if Tesla’s price drops significantly, your borrowing limit may shrink — which could trigger a margin call.
3. Know How Interest Rates on Stock Loans Are Determined
Each broker sets interest rates for margin loans and often vary based on how much you borrow and current benchmark rates.
Rates can be variable, changing alongside the federal funds rate.
Borrowing more often gets you a lower rate (e.g., 8% on $10K vs. 6% on $100K).
Some brokers offer reduced rates for premium clients or high-balance accounts.
For example, Interactive Brokers may offer rates as low as 5.8% for large balances, while other platforms may charge 10% or more for smaller loans. Therefore, always compare margin rates before borrowing — it can significantly affect your long-term cost.
- The Smart Investor Tip
Contact your broker to negotiate a lower rate if you have a large balance — some brokers offer unpublished “relationship pricing” to loyal or high-net-worth clients.
4. Consider What Happens If Your Stocks Drop in Value
A major risk of borrowing against stocks is a margin call — which occurs if your portfolio value falls below the broker’s maintenance threshold.
Brokers typically require a minimum of 25–30% equity at all times.
If your portfolio drops, you may be forced to add cash or sell stocks.
Failing to meet a margin call could result in automatic liquidation — without warning.
Imagine you borrow $15,000 against $30,000 in stocks. If the portfolio drops to $20,000, your broker might demand an immediate $5,000 deposit.
This risk is why many investors borrow only a conservative percentage of their total holdings.
- The Smart Investor Tip
Set up automated alerts when your equity percentage nears the maintenance margin — this gives you early warning before a margin call hits.
5. Request the Margin Loan Through Your Broker
Once your margin account is active and you have eligible collateral, you can request the loan directly through your brokerage platform. Most brokers allow you to transfer borrowed funds to your linked bank account within 1–3 business days.
Many platforms (like Fidelity or Robinhood) offer a simple “borrow cash” feature inside your account dashboard.
You choose the amount you want to borrow — up to your available margin limit.
There’s usually no formal loan application, credit check, or approval wait time.
Things To Consider Before Borrowing Against Your Portfolio
Before taking a margin loan, it’s important to weigh the risks, costs, and long-term impact on your investment strategy.
Market Volatility Can Trigger Forced Selling: If your portfolio loses value, your broker may issue a margin call. This could force you to sell assets at a loss to maintain required equity levels.
Interest Costs Can Add Up Quickly: Margin loans may have variable rates tied to market conditions. Over time, compounding interest can reduce your portfolio’s overall return — especially if the borrowed funds aren’t used productively.
You Still Owe Even If Your Stocks Drop: The loan amount stays the same regardless of your portfolio’s performance. If your $20,000 investment drops to $12,000, you still owe the full borrowed amount.
It’s Best for Short-Term Needs or Strategic Moves: Using a margin loan for opportunistic investments or short-term cash flow needs (like covering taxes or buying property) may make more sense than long-term borrowing.
FAQ
No, borrowing against stocks isn’t a taxable event because you’re not selling the asset. However, you still owe interest to the broker.
If you don’t meet a margin call in time, your broker can sell your stocks without your permission to bring the account back into balance.
Yes, many ETFs are marginable just like stocks, especially highly liquid ones like SPY or QQQ. Always check with your broker for eligibility.
Generally, yes. You can use the loan for real estate, personal expenses, or investing in non-margin securities, but not for buying more on margin unless allowed.
Typically, no. Margin loans don’t appear on your credit report and don’t require a credit check, but missed obligations can still hurt you financially.
Most brokers let you transfer margin funds to your bank within one to three business days. Some even allow same-day access.
Sometimes. Interest may be deductible if the funds are used for investment purposes, but not for personal spending. Check with a tax advisor.
Some brokers allow borrowing against certain mutual funds or investment-grade bonds, but stocks and ETFs are more commonly accepted as collateral.
Volatility increases the chance of a margin call, which could lead to sudden forced sales. It’s risky during downturns or unpredictable markets.
No fixed monthly payments are required. Interest accrues and is charged monthly, but you can repay the principal at any time.
Yes, you can borrow more as your portfolio grows, or repay and re-borrow as needed. Your borrowing power adjusts with your account value.
