Investing
Margin Loan Calculator
Borrowing on margin buys more than your cash allows, and amplifies the result — up and down. Interest is a certain drag, and there is a hard floor: if the portfolio falls to the margin-call price, the broker sells your holdings, often at the worst possible moment.
Tested against worked examplesHow we verify
The minimum equity the broker requires — 25% is the regulatory floor, brokers often set more.
Margin call at a portfolio value of: $71,429
Margin call at a portfolio value of
$71,429
A 64.3% drop from here forces a sale.
Leverage cuts both ways. The 64% cushion sounds comfortable until a fast drop erases it and the broker sells without asking, locking in the loss. Margin is best kept small relative to the portfolio, and never used for money you cannot afford to have force-sold.
- Interest cost over the period
- $4,000
- Return with leverage
- $16,000
- Return without borrowing
- $15,000
- Return on your equity
- 10.67%
- Cushion before a margin call
- 64.29%
Compare scenariosTry three values of one input
| Portfolio value | |||
|---|---|---|---|
| Margin call at a portfolio value of | $71,429 | $71,429 | $71,429 |
| Return with leverage | $14,000 | $16,000+$2,000 | $18,000+$4,000 |
| Return without borrowing | $13,000 | $15,000+$2,000 | $17,000+$4,000 |
| Return on your equity | 10.77% | 10.67%−0.1% | 10.59%−0.18% |
| Cushion before a margin call | 60.32% | 64.29%+3.97% | 67.53%+7.22% |
Every other input stays at the value you set above — currently $200,000 for portfolio value. Differences are measured against the first column.
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How this calculator works
Interest is the amount borrowed times the margin rate, prorated over the holding months. The margin-call price is the amount borrowed divided by one minus the maintenance margin — the value at which equity falls to the required minimum. Levered return is the gain on the full position minus interest; unlevered return is the gain on your equity alone; return on equity divides the levered result by your equity.
Interest is treated as simple over the period rather than compounding daily, a small simplification. The margin-call price assumes the whole position moves together; a concentrated holding can trigger a call faster. Tax treatment of margin interest and the sequence of intra-period price moves are not modelled.
What this assumes
- The margin rate you enter, which is variable and can change without notice.
- Maintenance requirements are set by the broker and can be raised at any time, including during a falling market.
- A margin call can force a sale at the worst possible moment; this shows the threshold but cannot show the timing.
What changes this number
- Leverage used
- Amplifies gains and losses equally. The loss side arrives faster because it can trigger a forced sale.
- Maintenance threshold
- How far the portfolio can fall before a call. The single number to know before borrowing.
- Interest rate
- Variable, and rises exactly when markets are most stressed.
A worked example
Take the $50k borrowed on $200k scenario. These figures are produced by the calculator above, not written alongside it, so they always match what the tool returns.
What you enter
- Portfolio value
- $200,000
- Amount borrowed
- $50,000
- Expected annual return
- 10%
What it returns
- Margin call at a portfolio value of
- $71,429
- Interest cost over the period
- $4,000
- Return with leverage
- $16,000
- Return without borrowing
- $15,000
- Return on your equity
- 10.67%
Leverage cuts both ways. The 64% cushion sounds comfortable until a fast drop erases it and the broker sells without asking, locking in the loss. Margin is best kept small relative to the portfolio, and never used for money you cannot afford to have force-sold.
Try an example
Frequently asked questions
How does a margin loan work?
You borrow from your broker against the securities in your account, using them as collateral, and can invest more than your cash allows. Interest accrues daily. It magnifies gains when the market rises and losses when it falls, and the broker can demand repayment — by selling your holdings — if your equity drops too far.
What is a margin call?
A demand to add cash or securities when your equity falls below the maintenance margin — the minimum percentage of the position you must own outright. If you cannot meet it, the broker sells your holdings to restore the ratio, often at a loss and without waiting for your instruction.
At what price do I get a margin call?
When equity divided by portfolio value falls to the maintenance margin. Borrow $50,000 against a $200,000 portfolio with a 30% maintenance requirement and the call comes at about $71,400 — a 64% drop. The more you borrow, the smaller the cushion before that price is reached.
Is investing on margin worth it?
It raises expected return but also risk and cost, and adds the possibility of a forced sale at the worst time. For most investors the interest drag and the margin-call risk outweigh the benefit. Where it is genuinely useful is short-term liquidity, or modest leverage a portfolio can easily withstand — not aggressive borrowing.
How is margin interest taxed?
Margin interest may be deductible as investment interest expense, but only up to your net investment income and only if you itemise. Many investors get no deduction at all. Do not count on the tax benefit when judging whether the loan is worthwhile.
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Disclaimer: DayCents provides this calculator for educational purposes only. Results are estimates based on your inputs and the stated assumptions — they are not financial advice, a quote, or an offer of credit. Consult a qualified financial professional before making major money decisions.