What is 'Margin Loan Availability'

Margin loan availability describes the amount in a margin account that is currently available for purchasing securities on margin or the amount that is available for withdrawal. A margin account makes loans available to the customer of a brokerage firm using the customer's securities in their account as collateral. As the value of the securities in the account rises and falls, the amount that becomes available for loan also changes, since the securities have to cover the amount made available for the loan. If the securities drop in value, so does the margin loan availability. Margin loan availability can be used in a couple of specific contexts.

1. The dollar amount in an existing margin account that is currently available for purchasing securities. For new accounts, this represents the percentage value of the current balance that is available for future margin purchases.

2. The dollar amount available for withdrawal from an account with existing marginable positions being used as collateral.

BREAKING DOWN 'Margin Loan Availability'

Margin loan availability tells a brokerage customer how much money in the account is currently available for purchasing securities on margin or how much is available for withdrawal. The margin loan availability will change daily as the value of margin debt (which includes purchased securities) changes, but it may not reflect pending trades that are in between the trade date and the settlement date. If the margin loan availability amount in an investor's account becomes negative, the investor may be due for a margin call or formal request to sell some of the marginable securities.

Example of Margin Loan Availability

For example, Bert is a client at Ernie's Brokerage Firm. Bert has a margin account with some securities in it. These securities are held as collateral by Ernie's Brokerage Firm for any money Bert borrows to buy securities or withdraw from the account. The money borrowed from Ernie's firm to buy these additional securities or to withdraw is called a margin loan. The available amount Bert can take at a given time is called the margin loan availability and is based on the current value of the pledged securities.

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