Calculate the true cost of borrowing on margin. Compare broker rates, see daily/monthly costs, effective rates, and whether leverage boosts or erodes your returns.
Margin interest is the ongoing cost of borrowing money from your broker to buy securities. Unlike a fixed loan, margin interest typically accrues daily on the outstanding balance and can significantly erode your returns — especially for positions held over months or years.
Most brokers charge between 5% and 13% annually, compounded daily. On a $50,000 margin loan at 8%, you're paying roughly $11 per day or $333 per month. Your investments must earn more than the interest rate just to break even, and any shortfall comes directly out of your pocket.
This calculator shows your exact interest cost for any holding period, the effective annual rate after compounding, the break-even stock return, and the net impact of leverage on your returns. The rate comparison table lets you evaluate different broker rates, and the monthly accrual schedule shows how the cost compounds over time.
Use the preset examples to load common values instantly, or type in custom inputs to see results in real time. The output updates as you type, making it practical to compare different scenarios without resetting the page.
Margin interest is easy to underestimate because the position gain is visible while the borrowing cost accrues quietly in the background. This calculator makes the financing drag explicit so you can see when leverage adds value and when it simply raises risk.
Daily Compound Interest = Balance × ((1 + Rate/365)^Days − 1) Simple Interest = Balance × Rate × (Days/365) Effective Rate = (1 + Rate/365)^365 − 1 Break-Even Return = Interest Cost / Total Position × 100 Leverage Boost = ROE_leveraged − ROE_unleveraged
Result: Interest cost = ~$4,160 (daily compounding)
A $50,000 margin loan at 8% with daily compounding accrues approximately $4,160 over one year. The effective annual rate is 8.33%. You need your investments to return at least 4.2% on the total position just to cover the interest.
A margin loan raises the minimum return your portfolio needs to earn before leverage becomes worthwhile. If the expected return is only slightly above the borrowing cost, the upside is thin while the downside risk stays large.
A margin trade that looks reasonable over a few days can become unattractive over months once the interest drag compounds. Use the holding-period inputs to test whether the trade still works if you are early on the thesis but late on the timing.
Small differences in quoted margin rates can produce large changes in annual cost on a sizeable balance. Compare effective annual cost, not just the advertised nominal rate, when choosing where to borrow.
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This calculator estimates financing drag on a margin debit balance under three user-selected accrual methods: simple interest, daily compounding, or monthly compounding. It computes total interest cost over the chosen holding period, effective annual rate under the selected compounding assumption, break-even portfolio return needed to offset the borrowing cost, and a simplified leveraged-versus-unleveraged return comparison using the expected annual asset return you enter.
The result is a planning worksheet rather than a broker statement recreation. Real brokers may use different day-count conventions, tiered rates, changing debit balances, or monthly interest debits, and the tax input is not modeled inside the return comparison.
Most charge daily based on the settled margin debit balance. The formula is: Daily Charge = Balance × (Annual Rate / 360 or 365), accrued daily and debited monthly.
Yes, margin interest is generally deductible as investment interest expense, but only against net investment income. Consult a tax advisor.
Rates vary by broker competitiveness and loan size. Interactive Brokers charges 5-6%, while full-service brokers may charge 10-13%. Larger balances often get lower rates.
When your expected return is close to or below the margin interest rate. If you're borrowing at 8% and expect 9% returns, the leverage boost is minimal and the risk is high.
If you don't pay the interest monthly, it adds to your balance and compounds. Most brokers debit interest monthly from your cash balance.
Use a lower-rate broker, qualify for size-based pricing tiers if available, reduce the holding period, or lower the borrowed balance. The cheapest margin loan is still expensive if the position barely clears the financing hurdle.