Margin is borrowed money from Robinhood that lets you buy stocks with less cash upfront
When you use margin on Robinhood, you are borrowing money from the brokerage to purchase stocks. Instead of needing $1,000 to buy $1,000 worth of stock, you might put up $500 of your own money and borrow $500 from Robinhood. You pay interest on the borrowed amount, and Robinhood can demand the money back at any time.
Margin is not information programs and not a gift. It is a loan with real costs and real risks. If your stocks fall in value, you still owe the full borrowed amount. If they fall far enough, Robinhood will force you to sell positions to cover the loan — a process called a margin call. Most people who use margin lose money because the interest and forced sales eat into gains, or because a sudden drop wipes out their account.
Robinhood requires you to have at least $2,000 in your account to use margin at all. Even then, you cannot borrow as much as you want. The amount you can borrow depends on the type of account you have and the stocks you are buying.
Key Takeaways
- Margin is a loan from Robinhood; you pay interest on the borrowed amount and must repay it on demand.
- You need a minimum of $2,000 in your account to access margin, and Robinhood sets limits on how much you can borrow based on your account type and the stocks you buy.
- A margin call happens when your account value drops below Robinhood's maintenance requirement, forcing you to deposit cash or sell stocks when ready.
- Margin interest rates on Robinhood vary based on how much you borrow and your account balance, and interest accrues daily.
- Margin amplifies both gains and losses — a 10% stock drop can wipe out 20% or more of your own money if you are borrowing heavily.
How much can you borrow on Robinhood
Robinhood sets a buying power multiplier based on your account type. With a standard individual account, you can borrow up to the amount of cash you have on hand — meaning if you have $5,000, you can borrow up to $5,000 more and control $10,000 in stocks. This is called 2:1 leverage.
If you have a Robinhood Gold subscription (a paid membership), the multiplier increases to 2.5:1 for accounts under $25,000 and up to 6:1 for accounts over $25,000. A $5,000 account with Gold could control up to $12,500 in stocks. A $30,000 account could control up to $180,000.
These are the maximum limits. Robinhood also restricts margin on certain stocks — penny stocks, newly listed companies, and highly volatile stocks often have lower or zero margin availability. You can check how much margin a specific stock allows by looking at its detail page on the app.
Margin calls and forced liquidation
Robinhood requires you to maintain a minimum account value relative to what you have borrowed. This is called the maintenance requirement. For most stocks, you must keep your account at 30% of your total stock value. If your account drops below that, Robinhood issues a margin call.
When a margin call happens, you have a limited time — usually the same trading day or the next morning — to either deposit cash or sell stocks to bring your account back above the maintenance level. If you do not act, Robinhood will automatically sell your positions without asking you. The app will notify you, but the sales happen fast, often at unfavorable prices during volatile moments.
Example: You have $5,000 cash and borrow $5,000 to buy $10,000 in stocks. The stocks drop to $6,000 total value. Your account is now below the 30% maintenance threshold. Robinhood demands you deposit $1,400 or sell $1,400 worth of stock when ready. If you do neither, Robinhood sells $1,400 of your positions automatically.
How margin interest works
Robinhood charges interest on the money you borrow. The rate varies based on your account balance and how much you are borrowing. Rates typically range from around 5% to 12% annually, though Robinhood Gold members may receive lower rates. Interest accrues daily and is charged to your account monthly.
The interest is calculated on the average daily balance of your margin loan. If you borrow $5,000 for one week and then repay it, you pay interest only for that week, not the full month. However, the daily accrual means the cost adds up quickly if you hold a large margin position for months.
You can see your current margin interest rate in the Account menu under Margin. Robinhood publishes its rates publicly, and they can change based on market conditions and your account status.
Margin vs. cash accounts: what is the difference
A cash account on Robinhood means you can only spend money you actually have. You cannot borrow. You also cannot buy and sell the same stock within five business days — a rule called the pattern day trader restriction. If you do, Robinhood locks your account for 90 days.
A margin account removes the five-day restriction and lets you borrow, but it comes with the risks of margin calls and forced sales. You can switch between account types in the Account settings, though Robinhood may require you to wait a few days after switching to margin before you can borrow.
Most new traders should start with a cash account. Margin is a tool for experienced traders who understand the risks and have a plan to manage them. The interest cost and forced liquidation risk make margin expensive for casual investors.
When margin can wipe out your account
Margin amplifies losses. If you buy $10,000 in stock with $5,000 of your own money and $5,000 borrowed, a 20% drop in the stock price means your $5,000 is now worth $4,000 — a 20% loss on your money. But a 50% drop means your $5,000 is worth $2,500, which is a 50% loss on your money. The borrowed money does not cushion the fall; it magnifies it.
In extreme cases, margin can force you to sell at the worst possible time. If the market drops sharply and many stocks fall at once, a margin call forces you to sell into that downturn, locking in losses. You sell at the bottom, miss the recovery, and pay interest on money you no longer have borrowed.
Robinhood also has the right to close your account or restrict your trading if you repeatedly trigger margin calls or if your account balance falls below $2,000. This is rare but possible.
How to use margin responsibly, or avoid it
If you decide to use margin, treat it like any other loan: borrow only what you can afford to repay, keep cash on hand for margin calls, and do not borrow the maximum amount available. A common rule is to use no more than 1.5:1 leverage — borrow only half of what you have in cash — and to keep 50% of your account in cash at all times.
Track your maintenance requirement actively. Robinhood shows it in the Account menu, but you should check it before you buy stocks, not after. Know the exact price at which a margin call would trigger, and decide in advance whether you are comfortable with that risk.
For most people, the simplest approach is to avoid margin entirely. You can build wealth steadily by investing only the money you have. The interest cost and stress of margin calls are not worth the small speed boost in returns.
Frequently Asked Questions
What happens if I cannot pay back the margin loan?
Robinhood will force you to sell stocks to cover the loan. If your account value falls below the amount you owe, Robinhood can close your account and pursue collection. You are legally responsible for the debt, and it can affect your credit if it goes unpaid.
Can I use margin to buy options or crypto on Robinhood?
Margin for options is available but works differently and carries higher risk. Crypto purchases on Robinhood cannot use margin — you must pay in full with cash. Check the specific rules for the asset you want to buy in the Robinhood app.
Does Robinhood Gold make margin worth it?
Robinhood Gold lowers margin interest rates and increases your borrowing limit, but it costs $5 per month. For most small accounts, the subscription fee and interest cost together outweigh any benefit. Gold makes more sense if you are actively trading large positions and can negotiate better rates.
How long can I hold a margin position?
You can hold a margin position indefinitely as long as you maintain the 30% maintenance requirement and pay the daily interest. There is no time limit, but the longer you hold it, the more interest you pay. Robinhood can demand repayment at any time, though this is rare outside of margin calls.
What is the difference between margin and a cash advance?
Margin is a line of credit tied to your brokerage account and your stock holdings. A cash advance would be a loan against your account balance. Robinhood offers margin, not cash advances. The money you borrow must be used to buy stocks; you cannot withdraw it as cash.