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Finance Glossary

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Call Loan


Think: Margin account loan. Margin and call loans are very short-term loans in nature, usually with interest rates "good" for just one day. That rate is the call loan rate. But they are generally pretty safe bets for the brokerage as the securities themselves are used as collateral on the loans and most margin accounts have strict limits - i.e., many brokerages won't loan more than twice the equity value of an account in margin. Your whole portfolio of securities would have to drop 50% in one day for them not to get back the money they loaned, so they figure that the risk is negligible. Usually they're right but baloney does happen. But because the odds of it happening are relatively low, call loans usually have a low interest rate.