At Angel One, we believe in transparency and clarity when it comes to financial charges. Below, we’ve explained the different types of interest that might be charged in various scenarios. We’ve kept it simple to help you understand each charge better.
Interest on Negative Ledger Balance
- What It Is:
Interest on Negative Ledger Balance is charged when your account balance goes below zero.
- Why It Happens:
If your account is debited for various reasons (like fees or trades in loss), your balance may go negative.
- How It Affects You:
Imagine your account balance is ₹5,000, but because of charges and other fees, It got debited by ₹6,000. Your balance becomes -₹1,000, and interest will be charged on this negative balance until you repay it.
Interest on Pay Later (MTF)
- What It Is:
Interest on Pay Later, also known as Margin Trading Facility (MTF), is charged when you use borrowed funds to buy more shares than you could with just your own money.
- Why It Happens:
MTF allows you to leverage your investments by borrowing money to increase your purchasing power. The interest is charged on the borrowed amount.
- How It Affects You:
If you buy shares worth ₹1,00,000 using ₹25,000 of your own money and ₹75,000 borrowed under MTF, interest will be charged on the ₹75,000 borrowed until you repay or sell it.
Interest on Collateral Used
- What It Is:
Interest on Collateral Used is charged when you use your shares or other securities as collateral to get a loan for trading.
- Why It Happens:
When you pledge your securities as collateral to obtain a loan, you’re essentially borrowing against your investments. Interest is charged on the amount borrowed against the collateral, when you use that collateral to cover your margin requirements for the trade.
- How It Affects You:
Suppose you have shares worth ₹2,00,000 and you pledge them to get a loan of ₹1,00,000 for trading. Interest will be charged on the ₹1,00,000 loan amount until it’s repaid.
Key Takeaways
- Interest on Margin Shortfall: Charged when your account doesn’t have enough funds to meet margin requirements.
- Interest on Negative Ledger Balance: Charged when your account balance goes below zero.
- Interest on Pay Later (MTF): Charged when you borrow money to buy more shares.
- Interest on Collateral Used: Charged when you borrow against your securities.
