When you want to buy an amount of stocks that you can't completely fund, you may be able to borrow the money you need from your broker. This type of loan is called a margin loan. And, like any other loan, it comes with an interest rate. The interest rate that you will be charged for a margin loan is determined by the individual broker, but it's generally based on the broker's call, also known as the broker's call rate, call loan, or call loan rate. This rate is published daily in the Wall Street Journal.

While a stock broker may not be the first person you think of when deciding where you want to borrow money from, it can be a profitable venture. But like most things, it is not an endeavor without risk. By signing up for a margin account with your stock broker, you can purchase more stock than you can actually pay for by borrowing the money from your broker. The cash and/or stocks you own in the account are used as security for the loan. In fact, in order to be eligible for the loan, broker's usually impose a minimum equity amount which is generally around 35%. That is, the value of the stock you own less the amount you owe must be at least 35% of the total value.

The interest rate that the broker charges can be over or under the broker's call rate, generally plus or minus one or two percent but it can be more. The broker's call is a variable rate which means it can fluctuate up and down based on the underlying interest rate index — the prime rate set by the Federal Reserve. A broker's call rate may vary during the life of the loan, or it may remain the same. The loan may be long term or short term.

Investors should be careful when engaging in this sort of arrangement. Since the loan is secured by the value of the stocks in your account, if the stocks were to suddenly drop in value, the broker may issue a margin call. That is, the broker may require the investor to provide more money. If the margin investor fails to do this, the stock broker can sell stock from the investor's account until the loan is repaid. This can be bad for the investor as this is usually the worst time for the investor to be selling the stock. Unfortunately, there is no other choice for the investor if the loan cannot be repaid. Herein lies the risk of margin loans.

Investors thinking of using margin when investing may be much wiser to get a loan from a traditional bank, although the bank's interest rate will likely be higher than the broker's call rate. This is due in part to the fact that the bank will give you a fixed rate rather than a variable rate as in the case of a broker's call. Investor's should weigh the risks of going with a margin loan versus other loan options, and proceed wisely!