Margin Loans – Borrow money from your broker
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Today, I want to touch on an important but controversial topic: margin loans. A margin loan is a loan with collateral that most brokers offer.
Brokers let you invest on margin, with an amount based on the value of the stocks you have with them. You can use this form of leverage to either invest with leverage or borrow money from your broker.
This article will cover everything you need to know about margin loans.
Margin Loans
A margin loan is a loan against the value of your securities. So, the more securities you have in your broker account, the higher loan you can get. You can then use this extra money either to invest more (use leverage) or to use the money for other expenses should you need up.
In Europe, margin loans are often called Lombard loans. This name comes from the Lombardy region, where it is said to have originated. But they are the same thing.
So, why am I talking about margin loans? Aren’t they very risky? Yes, they are risky, but they are also very interesting.
For me, margin loans have three significant advantages:
- They give you a substantial line of credit should you need a large amount of cash for an investment opportunity or significant expenses.
- They can allow you to take advantage of market conditions to invest more aggressively.
- The interests you pay to your broker are deductible from your taxable income.
For most people, point 1 is the more interesting of the three. Indeed, this can allow people to reduce their emergency funds since they can draw large amounts of money from their broker accounts without selling stocks.
Point 2 is also interesting, but you must be careful about this. Indeed, by investing with leverage, you are multiplying the risks.
A margin loan is still a loan, so it will not be free. But depending on the time, it can be very cheap. And for a short time, this will be much cheaper than credit card debt.
Each broker has different margin requirements and different conditions for the margin loans. So we will use two brokers as examples: Interactive Brokers and Swissquote.
It is important to note that not all brokers have the same kind of requirements, especially if they are in different countries. And some brokers allow you to be more aggressive than others.
Finally, both margin requirements and margin rates can change over time. So, if you are very close to the limit, you may be in trouble if the margin requirements change.
Interactive Brokers Margin Loans
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Since each broker can provide different conditions for margin loans, we should take a broker as an example. We take Interactive Brokers (IB), my favorite broker, as an example and see what they offer for margin loans.
We start with their margin rates. IB uses a system where you pay different rates based on your borrowed amount. The more money you borrow, the cheaper it will get. On top of that, the rates are not the same for IBKR Pro and IBKR Lite. Since IBKR Lite is unavailable in Switzerland, I will only cover IBKR Pro here.
I also must repeat that margin rates are adapted all the time. So, I can only cite the margin rates at the time of this writing (July 2025). For instance, here are the margin rates for USD:
- Below 100’000 USD: 5.83%
- Between 100’000 and 1’000’000 USD: 5.33%
The rates can go even lower, but most investors will never borrow more than a million from IB. If you have a loan of 200’000 USD, you will pay rates per tranche: 6.07% on the first 100’000 USD and 5.57% on the second 100’000 USD.
We can see that the margin rates are currently expensive for USD. The reason is that federal banks are now increasing rates to fight inflation. Three years ago, these rates were much lower.
We can also look at the rates for CHF:
- Below 90’000 CHF: 1.50%
- Between 90’000 and 900’000 CHF: 1.00%
We can see that margin rates on CHF are significantly lower than on USD. Historically, the interest rates set by the Swiss National Bank have generally been considerably lower than those set by the Federal Bank in the US. This is good news if you need a loan in Switzerland.
We can see the margin requirements now. The margin setup at Interactive Brokers is relatively complicated. First, the default account type (cash) does not allow you margin. So, you must use a different account type. Then, Interactive Brokers has two different margin accounts:
- Margin accounts that obey Regulation T margin requirements, a rule-based system.
- Portfolio Margin accounts that obey risk-based systems.
Portfolio margin accounts have more complex rules and eligibility. Therefore, I will focus on margin accounts. But it is essential to know that portfolio margin accounts allow greater leverage. Therefore, aggressive investors will prefer it. But for some simple investors, this should matter.
So, with a margin account, you can borrow 50% of the value of the securities you own. So, if you have 100’000 CHF in securities, you can borrow 50% of that value. This 50% is known as the initial margin.
This initial margin also allows you to invest with a leverage of 2:1 (100/50). This means that if you have 10’000 CHF in cash, you can invest 20’000 CHF in stocks. It also means that if you have 10’000 CHF in securities (fully paid), you can buy an extra 10’000 CHF in stocks.
The initial margin requirement is for holding the margin overnight (while the markets are closed). A second margin requirement is the maintenance margin that works for intra-day holding.
The maintenance margin requirement is only 25%. This means you have a leverage of 4:1 (100 / 25). So, if you have 10’000 CHF in cash, you can buy 40’000 CHF of securities with it. But you have to make sure to reduce the margin before the end of the trading day.
I recommend never using the maintenance margin. Only active traders should use it. Even a margin of 50% (initial margin) is already very aggressive.
For most people, it is enough to summarize that you can withdraw up to 50% of the value of your stocks and that you can invest with a leverage of 2:1.
Swissquote Margin Loans
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We can also take the example of a Swiss broker, Swissquote (SQ), to see how they compare. Swissquote uses the name Lombard loan instead of margin loan on their website.
Swissquote uses a straightforward system for margin rates. They only have one margin rate. It is not a tiered system. Here are the current margin rates as of this writing (July 2025):
- CHF: 3.00%
- USD: 7.31%
We can see that these rates are significantly higher than those offered by Interactive Brokers. Swissquote has a much higher premium on these rates. Swissquote premium is twice higher as IB’s premium. And the premiums of IB are clearly shown on the website, while SQ does not share this information.
We should also look at their margin requirements. Unfortunately, they are not very transparent and only cite the maximum margin. For stocks, SQ will lend up to 70%. And they will lend up to 90% for bonds. But in both cases, it can depend on the quality of the stocks or bonds. So, if you buy a very stable stock or ETF, they will lend you more than if you buy a stock of a volatile company.
So, if you have 100’000 CHF of stocks, you can get an extra 70’000 CHF margin loan. You must always meet the margin requirements, so be careful not to be too close to the limit.
Getting a 70% loan is relatively high. So it is a great way to get a margin loan to get money out of the broker. However, that loan will be pretty expensive. Nevertheless, this allows significantly higher leverage than Interactive Brokers.
So, Swissquote margin loans are very straightforward. SQ allows you to be aggressive with up to 70% in loans. However, there is a hefty premium on top of the market rates. So Swissquote loans are not cheap.
Saxo Margin Loans
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Since July 2025, Saxo also offers margin loans (also called Lombard loans here) to their Swiss customers.
Saxo has different rates based on the account tier. Most people are on the Classic tier, but investors can go up in tier once they have a large enough portfolio and volume.
- CHF: 2% with Classic tier, 1.5% with Platinum tier and 1.0% with VIP tier
- USD: 6.35% with Classic tier, 5.85% with Platinum tier and 5.35% with VIP tier
We can see that Saxo offers significantly better rates than Swissquote. We can also see that they are slightly mor expensive than Interactive Brokers. But if you get a premium tier, you can get rates at the same level as IB.
The margin requirements of a Saxo are similar to those of Swissquote, with different margin requirements for each stock. The maximum margin you can get is a 95% margin on the stocks with the highest grade. So, depending on the stock, you could get higher leverage with Saxo than with both Interactive Brokers and Swissquote.
Saxo margin loans are very straightforward. They have a very decent premium. And if you have a premium tier, you can get margin loans at the same level as Interactive Brokers. Therefore, Saxo margin loans are a great option.
Is margin risky?
It is essential to discuss the risks of margin lending. I want to discuss the risks for both cases:
- A margin loan for an expense or an opportunity.
- A margin loan to invest in securities.
Are margin loans risky?
Yes, margin loans can be risky. The main risk is that you do not fulfill the requirements, and the broker liquidates your stocks. If this happens at the wrong time, you may lose much money.
For our examples, you have 100’000 CHF in stocks and can borrow 50% of the value.
First, we will assume you are taking a margin loan to take money from your broker. You are not investing this money. It is outside the broker, and we assume it is not following market returns.
We start with a first simple example that is not too risky. You decide to borrow 10% (10’000 CHF). Then, the stock market fell by 50%, an extreme example, but one that happened in the past. At this point, your stocks are only worth 50’000 CHF, and you now have a 20% margin, twice more than what you started. Fortunately, in this case, you still meet the margin requirements and can keep your loan.
In another example, you borrow 50’000 CHF. Then, your stocks fall by 50% again. At this point, your margin is 100%, higher than what is allowed. The broker calls your margin and liquidates all your stocks to repay the loan. Your stocks have been liquidated at the worst possible time.
In this last example, if the stock market falls by more than 50%, you would be left with a negative value on your broker. If that happens, you must reinject cash into the broker to repay the debt.
So, in these cases, margin loans are already risky because your stocks can be liquidated, and you will not be able to stay in the market to recover. However, the worst you can lose is your entire portfolio, not more.
Is investing with leverage risky?
Yes, investing with leverage can be extremely risky.
If you use leverage (margin loan to invest more), your margin and stocks are at risk. You could lose more than what you have. We can take some examples again.
First, you borrow 10% (10’000 CHF) and invest in stocks. You now have 110’00 CHF in stocks and 10’000 CHF in debt. The stock market fell by 50%, you have 55’000 CHF in stocks and 10’000 CHF in debt, and your net worth is only 45’000 CHF. Your loss is more than 50% of your stocks. Since you have avoided a margin call, you may still recover.
In the second case, you borrow 50% (50’000 CHF) and invest in stocks. You have 150’000 CHF in stocks and 50’000 CHF in debt. The stock market falls by 50%. Your stocks are only worth 75’000 CHF, so you do not meet the margin requirements.
The broker will liquidate 25’000 CHF of stocks in a margin call. In that case, you are left with 50’000 CHF of stocks and 25’000 CHF of debt. Your net worth is 25’000 CHF, and you have lost 75% of your value!
If you borrow 50% and invest with a 2:1 leverage, you will have 200’000 CHF in stocks and 100’000 CHF in debt. If the stock market falls by 50%, you will get a margin call to sell all your stocks (only worth 100’000 CHF) to cover the debt. You are left with 0 CHF!
And if the market was to fail more than 50% in this case, you would have lost more than your entire portfolio and would be left with debt! The same is true if you have more than a 2:1 leverage.
In a good scenario, leverage will increase your returns. But in a bad scenario, leverage will multiply your losses! So, we can see that investing with leverage is extremely risky. And having high leverage is very risky.
Therefore, we can do a few conclusions regarding risk:
- You should not use a margin loan to invest in risky assets like stocks.
- You should not use volatile assets (like single stocks) as collateral for margin loans.
- You should not use a high margin. Staying below 20% makes it much safer.
How to use margin loans?
In most cases, I would not recommend using margin loans. Nevertheless, there are a few cases where it would be interesting to at least have them available. But I want to emphasize the risks related to margin loans first.
In any case, you must be careful about the costs of the margin loans. In 2023, margin loans are quite expensive, even in CHF. So you have to be cautious that you do not hold it for too long and that it is worth it.
A margin loan can be more expensive than the opportunity cost of selling stocks, depending on the margin rates.
And you want to select cheaper margin loans when possible. Looking at our two examples, a margin loan in CHF is much cheaper at Interactive Brokers than at Swissquote.
The first use case is to complete your emergency fund. It is much better to take a margin loan for a short time rather than sell your stocks if you need to cover a considerable expense. For instance, we have used this to pay for the land register instead of selling stocks. Knowing we have an extensive line of credit allows us to have a small emergency fund.
The second use case is more advanced, and I would not recommend it to most people. If you have a nice investment opportunity, this could be a great way to get cash available quickly without selling your stocks. I have never used that method, but that could be interesting for some aggressive investors. And you must be careful that this can quickly become risky if your investments fall in value together.
In any case, I would recommend not holding a margin loan for a long time. And I would also recommend keeping a low leverage (below 20%, ideally lower).
Conclusion
While risky, margin loans are an interesting tool. When margin rates are low, using a margin loan can be a great way to get a quick line of credit to complement your emergency fund.
On the other hand, I only recommend this to advanced investors who will first research how margin works. And I do not recommend investing with leverage because this market timing is unlikely to pay off for a long-term investor. Leverage should only be used for short and medium-term bets.
With Interactive Brokers, most people should use a cash account type, at least, to get started. If you start investing, having a margin account can be confusing.
Margin loans are also tightly linked to short-selling stocks, also using leverage. But short-selling is even more of a risky bet.
And if you are interested in lending subjects, you may be interested in securities lending, where your broker lends your shares to other investors.
What about you? Have you ever used margin loans? What do you think about them?
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Dear Baptiste,
There are some inconsistencies between Swissquote’s official policy and practice. I signed up for a Lombard loan facility with them and in the conditions it says the money should be used for purchasing financial assets. However on the phone they said I could do whatever I want with it (such as using it to install air conditioning). How is this possible?
Seems it’s similar for purchasing “NACH” (not available in Switzerland) shares. In theory not possible, but in practice tolerated.
Hi Max
Interesting. From what I have heard, you can indeed do what you want with it with a Lombard loan with Swissquote. I have heard multiple persons do it, but I did not know that this was different from the conditions.
One aspect which isn’t covered in the article is that if you only have a cash account, you cannot immediately have access to the proceeds of a sale. You need to wait until the sale is settled, which could take a couple of days.
With the margin account, you immediately have access to the money, that you can then invest somewhere else. Yes, you will pay interest rates for a day or two, but you will be able to seize opportunities when rebalancing.
You are right, I could have talked about that here, but I have another article entirely dedicated to settlements: How does cash settle with Interactive Brokers?
Hi Baptiste,
Would it make sense to take a margin loan from IBKR in CHF to pay the down payment on the purchase of an apartment should the stock market have gone down at the time of needing the funds?
Would the bank granting the mortgage get to know about it as I presume it would affect their affordability assessment of the mortgage which could be withdrawn?
How quickly can a loan be obtained with IBKR?
Thanks.
Hi Max
It could make sense financially, but be careful that half of the down payment, so 10% of the total value, must come from your own funds, not a loan. I don’t think the bank would get to know about it, but as a rule, it’s best to be honest.
If you have enough shares and a margin account, a loan can be done in a business day, only the time to get the bank wire.
Hi, very insightful.
Here is my situation & Q.
I have 600k CHF in ETF (S&P 500 40%, STOXX600 40% and MSCI world 20%).
I plan to buy an apartment for 1 mio CHF.
I am thinking to use margin loan / Lombard for 200k CHF to fund the 20% minimum to get mortgage from my bank (UBS).
I can save up 75k CHF every year to invest in ETF.
Do you think it is a good strategy ?
I’d like to avoid to sell my ETF to fund the 20% downpayment.
Hi CHarles,
33% margin is quite aggressive in my opinion and is difficult to hold for a while.
Also, in theory, half of the down payment (100k) should, in theory, come from hard cash.
I would say that 100k with margin sounds more reasonable.
But of course it mostly depends on your risk profile.
Interesting article and the leverage option to consider.
What is the max duration of this Lombard loan with InteractiveBroker ? Can it be a few years or must be shorter ?
How could we enable the margin loan with InteractiveBroker ?
Thanks alot.
Hi Ben,
There is no max duration. You can keep it as long as you want but you will need to meet the margin requirements for the entire duration as well.
You need a margin account on IBKR to get a margin loan. If you already have this account type, there is nothing to be done. If you don’t, you will need to convert your account.
Would it be worth taking a marginal loan to use towards the down payment on an apartment?
Hi Max
I would say it depends on the alternative. If you are comparing selling stocks and a margin loan, I think the margin loan makes more sense (if the rate is low).
If you already have cash or low-yielding assets, using them makes sense.
Great article!
Just a question, I also have an IBKR account in CHF (as I’m a swiss resident), but most of my positions are in USD. Indeed, most of my investments are ETFs quoted in USD.
If let’s say I borrow CHF 10’000, so I have a negative balance of this amount on my IBKR. And then I convert these into USD and ultimately buy some ETF in USD, what borrowing rate will apply? The USD one at around 7% or the CHF one at around 2.5%?
Thank you and best!
Hi Paul,
You cannot really borrow 10’000 CHF without doing anything with it. The only way to borrow 10’000 CHF and not buy stocks is to withdraw them to your own bank account.
If you buy stocks in USD on margin, you will pay the USD rate. If you want to use the CHF rate, you can simply buy USD on margin (buy USD.CHF on margin). Then you will have a large USD position and a large negative margin in CHF. From this point, you can then buy USD stocks.
Hi Baptiste,
Many thanks for your explanations.
Therefore, it seems interesting to me to buy some USD.CHF on margin and then buy some ETFs in USD or EUR, given the EUR and USD crash last week.
Have a nice day
Yes, it likely makes sense to use the best of the interest rates if you can handle the exchange rates.
Great introduction to the topic. Thank you.
Have you considered or do you have any experiences on the tax implications beyond debt and its interest?
If you invest on margin you may be considered a qualified professional investor by the tax authorities. Which is quite risk as taxes might skyrocket.
Hi Eon
If you take a margin loan to invest, you will indeed be investing with leverage and this will tick of the criteria (there are five) to be considered a professional investor. So, in theory, simply investing with leverage could make your capital gains taxed.
But taking a margin to cover some of your expenses should not qualify.
This post is not to recommend using margin loans to invest, but rather to know they are here so they can be useful in case one needs them for a big expense.
I have never invested with leverage and do not plan to.
Very good question! I’m interested to know why do you say “in theory” :), do you know cases with investing in stocks with Lombard Credit and it’s didn’t trigger capital gain tax?
Because the capital gains tax is really rare. I am convinced some people invest with leverage and are not considered professional investors. But the theory is that you should not invest with leverage. So, it’s difficult to justify using it.