Margin loan

Investors usually receive margin loans from their banks on very favorable terms and conditions. The amount of the loan is generally determined on the basis of the value of the investor's securities account, which serves as collateral for the loan. There are various lending limits for different securities. A higher percentage can be borrowed against blue chips and funds than against speculative stocks or bonds. If the value of the securities account falls, the maximum lending limit also drops, as does the customer's credit line. In this case, the bank has the right to close individual positions in the customer's account and hold them as collateral.