What is a brokerage loan?
Brokery loan is usually described as a loan provided by brokers or brokerage company by bank. This money is usually borrowed to finance accounts on margin, building stocks or financing the subscription of securities offered for the first time. A broker loan can also be extended for various other reasons.
Often an individual investor will look for a loan from an investment broker for financing the purchase of securities. In order to buy securities in this way, the investor must have an account on the margin. This margin account allows him to obtain securities without giving money at the time of purchase. In order to finance the margin for investment clients, the intermediary company can find a brokerage loan from a banking institution. A new problem is the security that is offered to the public for the first time. In order to qualify as a new problem, sequence must meet specific requirements for the Securities and Stock Exchange Commission (SEC). Brokers often decide to buy securities to createI inventory. In addition, this type of loan can be used to finance the required assets for the company's own portfolio.
The interest rate charged by the bank for lending money is called the broker rate. This rate is charged regardless of the reason for obtaining a loan. The interest rate on brokerage loans is about one point higher than short -term interest rates.
The brokerage loan is an election with a mere 24 -hour warning. This means that the loan is due on request, with a announcement of only one day. Since brokerage loans are election, the broker loan is often referred to as a cash rate.
Sometimes the term broker loan is used to indicate a loan extended by a broker to the investor. This type of brokerage loan is used to finance the purchase of securities of the debtor. The investor may be able to borrow up to 50 percent of the market value concernedCH securities. This type of loan is quite different from those made to brokers and is not charged the same brokerage loan or calling a cash rate.