What is a Broker Loan Rate?
When a broker makes arrangements to borrow funds on behalf of an investor, lending institutions generally charge what is known as a broker loan rate. Essentially, the broker loan rate is a special rate of interest that banks and other financial institutions extend to a broker as part of the loan package. Generally, broker loan rates are more aggressive than the interest rates that a consumer would be able to command if applying for a loan. There are two basic functions of the broker loan rate that make the option attractive for many brokers. First, the rate of interest for broker loans is highly competitive, which makes the act of securing a loan on behalf of an investment client worth the time and effort. Second, the broker loan rate allows the broker to strengthen ties with investment clients. The stronger rapport between broker and client helps to minimize the chances that a valuable client will take his or her business elsewhere. For the investor, having a broker handle the arrange
