DEFINITION of 'Call Loan Rate'

The short term interest rate charged by banks on loans extended to broker-dealers. A call loan rate is an interest charged on loans made to broker-dealers who use the funds to make margin loans to their margin account clients. These loans are payable by the broker-dealer on call (i.e. on demand or immediately) upon receiving such request from the lending institution. The call loan rate forms the basis upon which margin loans are priced. The call loan rate can fluctuate daily in response to factors such as market interest rates, funds' supply and demand, and economic conditions. The rate is published in daily publications including the Wall Street Journal and Investor's Business Daily (IBD). Also called broker's call.

BREAKING DOWN 'Call Loan Rate'

A call loan is a loan given to a broker-dealer that is used to finance client margin accounts. The interest rate on a call loan is calculated daily; this rate is known as the call loan rate, or broker's call. A margin account is a type of brokerage account in which the broker lends the client cash that is used to purchase securities. The loan is collateralized by the securities held in the account, and by cash that the margin account holder is required to have deposited. A margin account enables investors to use leverage; that is, they are able to trade larger positions than they would otherwise be able to. While this has the potential to magnify profits, trading on margin can also result in magnified losses.

Clients must be approved for margin accounts and are required to make a minimum initial deposit, known as the minimum margin, in the account. Once the account is approved and funded, investors can borrow up to 50% of the purchase price of the transaction. If the account value falls below a stated minimum (known as the maintenance margin), the broker will require the account holder to deposit more funds or liquidate position(s) to pay down the loan.

RELATED TERMS
  1. Broker's Call

    The interest rate charged by banks on loans made to broker-dealers, ...
  2. Call Loan

    A loan provided to a brokerage firm and used to finance margin ...
  3. Call Money Rate

    The interest rate on a type of short-term loan that banks give ...
  4. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  5. Call Money

    Money loaned by a bank that must be repaid on demand. Unlike ...
  6. Day Loan

    A temporary transfer of funds from a bank to an individual broker ...
Related Articles
  1. Investing

    Buying on Margin

    When an investor buys on margin, he or she pays a portion of the stock price – called the margin -- and borrows the rest from a stockbroker. The purchased stocks then serve as collateral for ...
  2. Personal Finance

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  3. Financial Advisor

    Margin Investing Gets A Bad Rap, But For The Thrill-Seeker, It's Worth It

    Investing on margin can be profitable but it's a risky play that needs care.
  4. Insights

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  5. Personal Finance

    How Banks Set Interest Rates on Your Loans

    Many factors go into how banks set interest rates for loans. Use this information to negotiate the best possible rate when you're borrowing.
  6. Personal Finance

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  7. Personal Finance

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  8. Managing Wealth

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  9. Personal Finance

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
  10. Personal Finance

    Lending From A Loan Officer's Perspective

    Learn how a loan officer thinks, so that you can get the best and safest loan.
RELATED FAQS
  1. How much can I borrow with a margin account?

    Understand the basics of margin accounts and buying on margin, including what amount investors can typically borrow for purchases ... Read Answer >>
  2. What is the interest rate offered on a typical margin account?

    Learn about the basics of trading on margin accounts, specifically the rate of interest that is typically charged for margin ... Read Answer >>
  3. How exactly does buying on margin work and why is it controversial?

    Learn how purchasing stock on margin works, and understand the risk associated with margin accounts that make the strategy ... Read Answer >>
  4. What's the difference between a cash account and a margin account?

    Compare and contrast margin and cash accounts. Margin accounts offer short-term loans, leverage on existing portfolios, and ... Read Answer >>
  5. What are the different types of margin calls?

    Learn the differences between margin calls and fed margin calls while reviewing the definitions of each and how to satisfy ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center