# Why Borrowing Against Stocks Has Always Been Expensive

> If you own stocks and need cash, every traditional option makes you pay for it, either in interest or in giving up the position.

Canonical: https://spout.finance/docs/why/

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If you own stocks and need cash, every traditional option makes you pay for it, either in interest or in giving up the position.

## Your options today

| Option | How it works | What it costs you |
| --- | --- | --- |
| Sell the stock | Sell some shares and spend the cash | You lose all future growth on what you sold, and selling may trigger tax |
| Broker margin loan | Borrow from your broker against your account | Interest charged every day you hold the loan, compounding against your position |
| Bank securities line | A bank lends against your portfolio | Usually only for large portfolios; interest still applies |
| Onchain lending markets | Deposit crypto, borrow stablecoins | Variable interest that can spike when many people borrow; few accept stocks |
| Spout | Post tokenized stocks, borrow USDC | No interest; you give up upside above the strike in a cycle where calls are exercised |

## What brokers charge today

Published margin rates at major US brokers, from each broker's rate page, as of 13 October 2026:

| Broker | Balance | Margin rate a year |
| --- | --- | --- |
| Charles Schwab | Under $25,000 | **12.075%** |
| Charles Schwab | **$250,000** to $500,000 | **10.325%** |
| Fidelity | Under $25,000 | **12.075%** |
| Fidelity | **$250,000** to $500,000 | **10.325%** |
| E*TRADE | Under $10,000 | **11.40%** |
| E*TRADE | **$250,000** to $500,000 | **9.20%** |
| Interactive Brokers Pro | Up to $100,000 | **5.38%** |
| Interactive Brokers Lite | Any balance | **6.38%** |

Securities backed lines of credit cost less but are only open to large accounts. As of 13 October 2026, Schwab's Pledged Asset Line was quoted at about 6.29% to 8.29% a year with a $100,000 minimum, and Fidelity's line at SOFR plus 1.90% to 3.10%, starting at $100,000 and typically needing at least $500,000 of pledged assets. These lines usually cannot be used to buy more securities.

Rates change often. Check each provider's current rates before you compare.

## Why interest hurts more than it looks

Interest is charged whether your stock goes up or not. Say you borrow $20,000 on margin at 12.075% a year and leave it for three years, with interest added to the balance monthly and nothing repaid. You owe about $8,679 in interest. Your stock has to rise by that much just for the loan to break even. In a flat or falling year, the interest is pure loss.

That is why long term holders rarely borrow against their stocks, even when they need cash: the cost works against the very reason they own the stock.

## Funding rates work the same way

Onchain, the usual way to hold leveraged exposure to a stock is a perpetual future. There is no interest line, but there is a funding rate, paid between longs and shorts at set intervals. When most traders are long, which is common on popular stocks, the longs pay it, and it tends to rise in strong markets, exactly when you most want to stay in the trade. Like interest, it is a charge for time.

A perpetual future also never gives you the stock. You hold a contract on an exchange, priced to follow the share, and the position exists only as long as you keep paying to hold it.

## Who keeps the yield on your stocks

Banks pay little on deposits and lend them out at a profit. Stocks work the same way. The premium options buyers pay, the interest on margin loans and the fees from lending shares to short sellers mostly go to brokers, dealers and funds. The person who owns the stock and carries its risk sees little of it.

Spout is built on the opposite idea: the income your assets produce should go back to the people who supply them and take the risk. The premium from your collateral pays lenders, lenders fund your loan, and nobody in between charges you for time.

## Why access is unequal

The best borrowing rates go to the largest accounts. The table above shows it: the same broker charges a smaller balance more, and bank credit lines start at $100,000. Outside the US, borrowing against US stocks is often harder and more expensive, and many people cannot open a US brokerage account at all.

At the top of the market the gap is wider still. Institutions and the very wealthy use prime brokers and private banks for financing at a spread over benchmark rates, leverage without selling, and option overlays that turn their holdings into income. Everyone else pays retail margin rates and rarely earns anything from their holdings beyond dividends. Spout is built to close that gap: the same economics, delivered through shared pools rather than individual accounts, so they do not depend on account size.

## What Spout changes

Spout removes the interest and the gatekeeping:

**No interest**: Lenders are paid from option premium on the collateral, so the borrower is not charged.

**No minimum account size**: Pooled collateral means small positions get the same terms as large ones.

**Open where Spout is available**: Sign in with an email or a Solana wallet, with no minimum balance. See Where Spout Is Available.

**Income goes back to users**: The premium your collateral earns pays lenders and funds your loan, instead of staying with an intermediary.

The trade off is different, not hidden: in a cycle where a stock rallies past its strike, you give up the part of the rally above the strike. What Borrowing Really Costs You explains this in detail.