Margin Interest Calculator
Compute the simple interest on a broker margin loan, using a 360-day year basis.
Input Data
Results
At a glance:Margin interest is the cost of a broker loan for buying on margin. Interest = amount borrowed × annual rate% × days ÷ 360 (simple interest, 360-day year); total repayment = amount borrowed + interest. The 360-day basis is common for broker financing.
Formula
Interest = amount borrowed × annual rate% × days ÷ 360.
Total repayment = amount borrowed + interest.
$$I = P \cdot r \cdot \dfrac{d}{360}$$$$Total = P + I$$How to Use
- Enter the amount borrowed.
- Enter the annual financing rate and the days.
- Read the interest and total repayment.
FAQ
Why does the calculator use a 360-day year instead of 365?
A 360-day year (the 'banker's year', sometimes called 30/360) is a long-standing convention in finance because it splits a year into twelve tidy 30-day months, making interest easy to compute by hand. With the formula amount × rate% × days ÷ 360, a smaller denominator makes the daily rate slightly higher than a 365-day basis, so the borrower pays a touch more than the nominal annual rate suggests — a common and expected convention for broker financing.
Is margin interest compounded?
This calculator uses simple interest: interest is computed once on the principal and does not roll back into the principal to earn more interest. In practice brokers usually accrue daily and charge monthly, so if a balance is carried a long time the cumulative effect can behave a bit like compounding. For a single-position estimate, simple interest is the right basis; check your broker's actual billing.
What are the risks of buying on margin?
Borrowing to invest amplifies both gains and losses. Beyond the interest cost, if your position falls and your equity drops below the maintenance margin, the broker can issue a margin call or even force-close your holdings. The risk is far higher than investing with fully own funds, and in extreme moves you could lose more than your initial deposit.
Why does margin interest seem small but is said to 'eat' investment returns?
The financing rate may look like just a few percent a year, but its drag on returns is often underestimated. First, it is a certain cost that accrues every day regardless of whether the price rises or falls, so your position must earn back the interest just to break even — margin trading raises your break-even point. Second, it accumulates linearly with holding time; a position held long after a wrong call can rack up large interest. Third, financing rates float with market rates and can rise in a tightening cycle. Fourth, it stacks on top of leverage risk: you may be paying interest while also facing a margin call. Tip: estimate the holding-period interest before borrowing and fold it into your break-even; avoid using margin for long-term holds, compare brokers' rates, and treat margin as a high-risk tool where the call/liquidation risk matters as much as the cost.
How does the 360-day convention affect the interest I actually pay?
Because the daily rate is annual rate ÷ 360 rather than ÷ 365, it is slightly higher under the Actual/360 convention (actual days as the numerator, 360 as the denominator), so a borrower pays a little more than the headline annual rate implies. The difference is tiny per day but grows with larger amounts and longer terms. Different institutions use different conventions (30/360, Actual/360, Actual/365), so always check your broker's contract and statements; this calculator fixes the 360-day simple-interest basis and matches most broker margin loans for a directional estimate.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.