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Margin Loan
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A margin loan is a loan made by a broker to an investor for the purpose of buying securities. The margin loan may be used for any purpose, but it is usually used to buy stocks, bonds, or other securities. A margin loan is secured by the client’s collateral; this collateral is a portfolio of securities. A margin loan typically carries a margin rate (the interest charged on the loan) that is favorable due to the presence of collateral. A client uses a margin loan when he or she does not have enough money to buy securities or otherwise take advantage of a potentially profitable rise in securities prices. A margin loan is the central part of a margin account.
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