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Margin loans explained: How a margin loan can elevate your investing
Considering borrowing to invest with a margin loan can amplify your returns by allowing you to control a larger investment position than with just your own capital. This boosts your buying power, offers flexibility, and enables strategic opportunities.
What if your investments could go further? A margin loan could boost your portfolio—beyond your initial capital—by allowing you to borrow against your investments and access new opportunities. It's a tool that can help you amplify your returns when used strategically.
In this guide, you'll find margin loans explained in simple terms: what they are, how margin loans work, and why they may appeal to ambitious investors looking to accelerate their financial goals. So, let's dive into the ins and outs of trading on margin, and how Questrade can support your investing strategy every step of the way.
What is a margin loan?
A margin loan is a line of credit from your brokerage that's secured by your eligible investments. It allows you to borrow funds, called margin, to increase your buying power beyond your available cash. In other words, you're using borrowed funds to invest, with the goal of amplifying your potential returns.
How do margin loans work?
To trade on margin, you'll need a Margin account where you deposit cash or eligible securities as collateral. Based on the value of these assets, Questrade will extend additional buying power. This allows you to purchase more securities than your cash alone would permit. You'll pay interest on the borrowed amount, as long as your account maintains the required collateral level, there's no fixed repayment schedule. This flexibility makes margin loans a unique and dynamic way to access dynamic capital in Canada.
The power and potential of margin loans
A margin loan lets you increase your buying power by borrowing money to invest. This allows you to take a larger position than you could with cash alone. The potential benefits include:
- Increased buying power: Invest in more securities than with your own funds alone.
- Amplified returns: Earn higher percentage returns on your capital, if your investments perform well.
- Flexibility: Access cash without having to sell your current investments.
The risks: what you need to know about margin loans in Canada
Margin loans can boost your investment potential, but they also come with added risk. Before using borrowed funds to invest, it's important to understand how trading on margin works and the potential downsides:
- Amplified losses: If your investments decline, losses will be larger than if you used only your own capital.
- Margin calls: If your account value drops, you may need to deposit more money or sell investments to meet the minimum requirement.
- Interest costs: You'll pay interest on borrowed funds regardless of how your investments perform.
- Market volatility: Sudden drops in the market can lead to unexpected margin calls.
Questrade's Edge: Margin Power and more
Questrade offers a flexible and competitive way to access margin loans in Canada. Our unique margin loan offering includes Margin Power, allowing you to use TFSA equity as additional collateral for your non-registered margin loan. With Questrade, you can expect:
- Advanced, transparent platforms: Monitor your available margin and account in real-time.
- $0 commissions: Trade stocks and ETFs commission-free to keep costs low.
- Margin Power: Use TFSA equity as extra collateral, giving you more flexibility and buying power.
Is a margin loan right for you?
Margin loans in Canada can be a powerful tool for experienced investors who understand market risk and want to increase their investment potential. They're best suited for investors with a clear strategy, a higher risk tolerance, and the ability to actively monitor their portfolio. While this type of loan isn't typically recommended for beginners, with the right research and risk management, any investor can learn how to make margin loans work for them.
Leveraging your potential with confidence
At Questrade, we offer transparent, competitive rates, and innovative tools to help you navigate margin trading confidently. Our advanced platforms are built to give you clarity and control, so you can borrow strategically and discover more of your portfolio's potential.
Unlock your portfolio's full potential! Open a Margin account today.
More questions? More answers.
How much can I borrow with a margin loan?
The amount you can borrow depends on the value and type of eligible securities in your margin account. Each security has its own margin requirement, and Questrade determines the loan value based on this. Regular monitoring is essential, as market changes can impact your borrowing capacity.
Can I use a margin loan to buy any type of investment?
No, not all securities are eligible for an investment loan. Some securities have specific requirements, and high-risk or highly volatile assets may not qualify.
What happens if I receive a margin call and can't meet it?
If you can't meet a margin call, Questrade may sell some of your investments to bring your account back to the required margin level—even at a loss. However, with the right strategy and risk management, borrowing to invest can still be a great tool for long-term investment growth.
More questions? More answers
The amount you can borrow depends on the value and type of eligible securities in your margin account. Each security has its own margin requirement, and Questrade determines the loan value based on this. Regular monitoring is essential, as market changes can impact your borrowing capacity.
No, not all securities are eligible for an investment loan. Some securities have specific requirements, and high-risk or highly volatile assets may not qualify.
If you can't meet a margin call, Questrade may sell some of your investments to bring your account back to the required margin level—even at a loss. However, with the right strategy and risk management, borrowing to invest can still be a great tool for long-term investment growth.
