Margin Trading: Is 18–24% Interest Worth

Margin Trading Facility (MTF) lets you buy stocks by paying only part of the price upfront, with your broker lending the rest. Sounds great — but the borrowed money comes at steep interest rates, and losses can be bigger than you expect.

Here's what happened: MTF lets retail investors buy stocks by paying as little as 25–50% of the stock price upfront, with the broker funding the rest as a loan.. Brokers charge 18–24% annual interest on the borrowed amount, and the purchased stocks are held as collateral until the loan is repaid.. SEBI regulates MTF, but individual broker terms — including margin calls and forced selling — vary widely and can catch investors off guard..

What you should do: Calculate total cost before using MTF: add annual interest charges to your expected stock return — if the stock doesn't beat 18–24%, you're losing money.. Check your broker's margin call policy — if your stock falls below a set threshold, they can sell your shares automatically without asking you.. Avoid MTF for volatile or small-cap stocks; limit it only to large-cap, fundamentally strong stocks where short-term price swings are lower..

MTF interest is tax-deductible as a business expense only if you declare stock trading as your primary business income — salaried investors usually cannot claim this deduction.