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Charles Schwab margin loan review

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Use your investment portfolio to take advantage of opportunities that come your way.

Borrowing on margin with Charles Schwab is a quick way to use your portfolio to finance new investments and pay for other expenses — without having to liquidate your assets. But a margin loan comes with risks, and you may end up owing Charles Schwab money if your investments take a hit.

$500,000

Max. Loan Amount

8.07% to 9.82%

APR

Details

Product NameCharles Schwab Margin loan
Min. Loan Amount$1,000
Max. Loan Amount$500,000
APR8.07% to 9.82%
Interest Rate TypeFixed

What makes a Charles Schwab margin loan unique?

A Charles Schwab margin loan gives you the ability to take advantage of timely investments and other opportunities that pop up without liquidating your assets. And its flexible repayment schedule means you can repay your loan at your own pace, provided you maintain a minimum equity balance in your brokerage account.

What is a Charles Schwab margin loan?

Despite its name, a Charles Schwab margin loan works more like a line of credit secured by your investment portfolio. You can borrow up to 50% of the value of your marginable securities, with credit lines ranging from $1,000 up to over $500,000.

Unlike a term loan that you receive in one lump sum, you can borrow from a margin loan as you need to. And you’re only charged interest on the amount you draw. Rates are fixed and range from 8.07% to 9.82% based on your credit limit — the higher your limit, the lower your interest rate.

Charles Schwab doesn’t list its loan terms online, so you’ll need to contact an investment specialist to learn more.

What are the benefits of a Charles Schwab margin loan?

From potential tax benefits to minimal paperwork, here are a few perks of a Charles Schwab margin loan:

  • Works like a line of credit. You can draw as much as you need from your portfolio at any given time — up to 50%.
  • Flexible repayment schedule. As long as you maintain a minimum equity balance in your brokerage account, you can pay off your line of credit whenever you want.
  • No extra paperwork required. A margin loan is generally a standard feature of a Charles Schwab brokerage account. Requesting one typically doesn’t require a long application process.
  • Interest may be tax-deductible. You may be able to deduct some of the interest on your margin loan from your taxes. However, the exact amount is limited to your net investment income, so you’ll want to consult a tax adviser for more info.

What to watch out for

Borrowing against your investments can be risky. Consider these potential drawbacks before moving forward:

  • Must have a brokerage account. You need to have a brokerage account with Charles Schwab already established — and at least $2,000 in eligible securities — to take out a margin loan.
  • Borrowing on margin is risky. If your investments take a hit, you may be issued a maintenance call that requires you to deposit more funds or sell off your securities to meet the minimum equity requirement, also known as the maintenance amount.
  • Interest rate could change without notice. Charles Schwab may change the interest rate or maintenance amount of your margin loan without notice, and can also sell off your securities to meet a margin call without warning you first.

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Am I eligible?

At the very minimum, you need to meet the following criteria to qualify for a Charles Schwab margin loan:

  • Have an eligible brokerage account with Charles Schwab
  • Have at least $2,000 in cash or marginable securities

How do I apply?

You can apply for a Charles Schwab margin loan by calling 877-752-9749 or visiting your local branch to speak to an investment specialist.

I got a margin loan. Now what?

You can now begin drawing from your brokerage account by using a debit card, writing a check or requesting a wire transfer. Charles Schwab requires you to maintain a minimum amount of equity in your account — typically around 30% of the total account value.

Provided you maintain this minimum, your margin loan will be free from a set repayment schedule. However, interest will continue to accrue until your loan is repaid.

What is a margin call?

A margin call is when a lender requires a borrower to deposit additional funds to cover potential loss in an account. Charles Schwab may initiate a margin call if your equity falls below the maintenance amount.

If it does, you may be required to deposit additional cash or securities to make up the difference. Otherwise, Charles Schwab may sell off your securities — with or without notifying you first.

Bottom line

A margin loan can give you access to money in your Charles Schwab investment portfolio without having to sell off any of your securities. But it comes with a great deal of risk should the market take a hit.

Not sure it’s right for you? You might want to compare unsecured personal loans instead. Or explore other loans available at Charles Schwab.

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