DEFINITION of 'Marginal Lender'

1. A business that will only provide funds to a borrower in exchange for a certain interest rate. If the interest rate drops below the level set by that lender, the transaction will not take place.

2. In the European Union, marginal lending is the practice of providing overnight liquidity to banks through the European Central Bank. The interest rate on these loans is called the marginal lending rate. It is the equivalent of the Federal Reserve's Discount Window in the United States.

BREAKING DOWN 'Marginal Lender'

A marginal lender should not be confused with a margin lender, which is a brokerage that lends money to investors who wish to make trades with borrowed funds. The investors put up securities they already own as collateral. Investing on margin is considered quite risky because it amplifies investment losses.

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RELATED FAQS
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    Learn about the basics of trading on margin accounts, specifically the rate of interest that is typically charged for margin ... Read Answer >>
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    Learn how purchasing stock on margin works, and understand the risk associated with margin accounts that make the strategy ... Read Answer >>
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    A margin account is an account offered by brokerages that allows investors to borrow money to buy securities. An investor ... Read Answer >>
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