What it costs
Updates live as you typeHow far the position can fall
Green is your room to fall. Red is past the maintenance requirement.
What the loan costs over time
Interest accumulated to date, and how much of it comes from letting interest ride.
Your return, borrowed versus cash
Return on the money you put in, over the holding period, at each possible position return.
Month-by-month accrual
| Period | Days | Opening balance | Interest | Cumulative | Closing balance |
|---|
What these numbers mean
Written against the figures you entered, so these update too.
The maths behind it
daily interest = debit balance × (annual rate ÷ day-count year)
call level = loan balance ÷ (1 − maintenance requirement)
leverage helps when: annual return > effective annual rate
Two conventions make the real cost higher than the quoted rate suggests: most US brokers divide by 360 rather than 365, and any interest you don't pay off joins the debit balance, so next month you pay interest on it.
How margin interest is actually charged
Margin interest is not a monthly fee. It accrues every single day on your debit balance — the amount you owe — and the daily amount is the annual rate divided by the day-count year. Your broker adds up those daily amounts and posts the total to your account once a month.
daily interest = debit balance × (annual rate ÷ day-count year)
period interest = daily interest × days held
Two things make the real cost higher than this suggests: the day-count year is usually 360 rather than 365, and any interest you don't pay off gets added to the debit balance, so next month you pay interest on it.
That second point matters more than people expect. If you never pay the interest down, the loan grows every month and each month's interest is slightly larger than the last. Over a few months it's small. Over a few years it is not.
The 360-day year
Most US brokers divide the annual rate by 360 to get the daily rate, then charge it on all 365 days of the year. You pay 365 days of interest at a rate calculated as though the year were five days shorter.
effective rate = quoted rate × 365 ÷ 360
A quoted 10% becomes 10.14% before compounding is even considered. It is not a large gap, but it is a gap that exists purely because of a convention, and it applies to every dollar you borrow for as long as you borrow it.
The calculator above reports the effective annual rate with both the day-count convention and monthly compounding folded in. That number, not the quoted rate, is what your investment has to beat.
How far the position can fall
A margin call arrives when your equity — position value minus what you owe — drops below the maintenance requirement as a share of the position. Because the loan is a fixed dollar amount and the position value moves, a modest decline eats your equity far faster than it eats the position.
call level = loan balance ÷ (1 − maintenance requirement)
At a $25,000 loan and a 30% maintenance requirement, the position triggers a call once it falls to $35,714. Starting from $50,000, that is a 28.6% drop — and if you let the interest accrue onto the loan, the call level creeps up every month.
Brokers are not required to give you time. Most margin agreements let them liquidate positions to meet the call without contacting you first, and they choose which positions to sell. This is the part of margin that does the real damage, and it has nothing to do with the interest rate.
When leverage pays for itself
The test is simpler than it looks. Borrowing adds value only when the borrowed money earns more than it costs. Your break-even is the effective annual rate — not the quoted rate, and not some vaguer sense that stocks go up over time.
leverage helps when: annual return > effective annual rate
Below that line, borrowing costs you money and adds risk at the same time. Above it, gains are amplified — and so is every decline, which is what makes the margin call maths above worth checking before you borrow rather than after.
The chart in the calculator draws both outcomes. The two lines cross at exactly the effective annual rate. Left of the crossing point, paying cash wins; right of it, borrowing wins, by a margin that grows with the size of the loan.
Four things people get wrong
Treating the quoted rate as the cost
The 360-day year and monthly compounding both push the real rate above the quoted one. Use the effective annual rate when you compare margin against any other form of borrowing.
Assuming the rate is fixed
Margin rates float. They move with the broker's base rate, which moves with benchmark rates, and brokers can change them without much notice. A loan that made sense at one rate may not at another.
Missing the tiered schedule
Most brokers charge less as the balance grows, in tranches. A $300,000 loan is usually a blend of two or three rates, not one. If your balance spans tiers, run the calculator with your blended rate rather than the headline number.
Sizing the loan by the interest, not the call level
Interest is the predictable cost. Forced liquidation at the bottom of a decline is the expensive one. Decide how far you need the position to be able to fall, then size the loan to that.
Key takeaways
- Interest accrues daily on your debit balance and posts monthly — it is not a flat monthly charge.
- A 360-day year makes the quoted rate about 1.4% higher than it appears, before compounding.
- Unpaid interest joins the loan, so the balance and the margin call level both drift upward.
- Borrowing adds value only above the effective annual rate. Below it, you are paying for extra risk.
- A 30% maintenance requirement on a half-borrowed position means a roughly 28% decline triggers a call.
This calculator is an educational estimator, not financial advice, and CountingMethods is not a broker or investment adviser. It models a single loan at a single rate; real accounts involve tiered rates, floating base rates, varying maintenance requirements by security, and broker-specific terms. Figures will not match a broker statement exactly. Check your own margin agreement and rate schedule, and speak to a licensed professional before borrowing to invest.