Why do investors use margin debt?

Investors typically use margin debt for two reasons, to trade securities or get cash without selling their investments. Trading securities– Investors use margin debt to borrow up to 50% of the purchase price of an investment.

What happens if you have too much margin debt?

If brokerage firms or regulators believe that there is too much outstanding margin debt, they can change the limits. While this is rarely exercised for overall margin, it is occasionally used for individual stocks that are deemed to be dangerously over-leveraged with investors. What is a Margin Balance?

How much margin debt can I Borrow?

Each brokerage company has its own limits on margin debt and the amount you can borrow depends on the type and value of your eligible securities. Lightly traded securities and those whose values are volatile may have lower margin percentages.

Can margin debt be repaid?

Margin debt must eventually be repaid and that generally occurs through sales of the securities that served as collateral for the loan. When margin debt is high, falling prices on stocks can lead to margin calls, which in turn create even more selling.