That's why it's important to know when and how to use margin. Know when it pays to use margin Margin loans should not be used every time you want to purchase more stock. Even experienced investors do not leverage all the time. The lower the prevailing level of interest rates, the cheaper it is to borrow money after you calculate taxes owed. When interest rates are rising, margin loans are more expensive on a nominal and an after-tax basis.
Brokerages boost their margin loan rates.
When margin rates rise, it's more expensive and riskier to borrow against your securities. When you borrow on margin, the loan rate you receive is not locked in. When interest rates rise, investors limit their investments and their consumer spending. Both trends stunt market growth and everything gets more expensive, including car loans and margin loans. If the economy is growing and earnings overall are strong, interest rates and inflation should be stable.