Lombard loan vs margin loan.

The difference between a Lombard loan and a margin loan is one of structure, not merely of name. A Lombard loan is a bespoke, negotiated term facility with an agreed loan-to-value and recourse profile. A margin loan is a standardised, open-ended, full-recourse line tied to a brokerage account and marked continuously against maintenance requirements. Both lend against securities; they are not the same instrument.

Two ways to borrow against securities

Both instruments answer the same question — how to raise cash against a portfolio without selling it — and both take securities as collateral. The resemblance ends there. A margin loan is a product of the brokerage account: standardised, immediate, and governed by the broker's house rules. A Lombard loan is a negotiated transaction: its terms are set at the outset and written into a bespoke agreement. The distinction shapes how much can be borrowed, what happens when markets move, and who bears the risk.

The margin loan: standardised and account-tied

A margin loan is offered by a broker or prime broker against the securities held in a trading account. The amount available is governed by a house margin schedule that sets an initial margin and a maintenance margin. The facility is open-ended and typically repayable on demand, and it is full-recourse: the borrower stands behind it in full. Its defining feature is continuous mark-to-market. If the collateral falls below the maintenance requirement, the broker issues a margin call, and if it is not met promptly the broker may sell the collateral, often with limited notice and at its own discretion. For an active trader, a margin account is fast and convenient; the trade-off is little control over terms and real exposure to a forced sale at the worst moment.

The Lombard loan: bespoke and negotiated

A Lombard loan is arranged by a private bank or a credit house against a defined pool of securities pledged to a custodian. The loan-to-value, the recourse profile, the tenor, and the covenants are negotiated up front and fixed in a facility agreement. It is a term facility — commonly twelve to thirty-six months, renewable by agreement — rather than an on-demand line. Recourse can be limited or non-recourse, ring-fencing the borrower's other assets. The collateral is still valued regularly, but a fall in value triggers a defined cure mechanism, such as pledging more collateral or repaying part of the loan, rather than an automatic liquidation. The structure suits substantial, less-frequent borrowing where terms and control matter.

Side by side

Which one fits

If you trade actively and value convenience and immediacy, a margin account does the job. If you hold a substantial or concentrated position and want defined terms, a choice of recourse, and protection from abrupt liquidation, a Lombard loan is the better fit. The difference is felt most in a falling market: a margin account can be sold out from under the borrower on short notice, while a Lombard facility's cure mechanics give room to respond. Neither instrument removes market risk, and both require the collateral to hold its value. For a wider comparison of routes, see the firm's guide to Lombard, margin, and stock loans, or the overview of the instrument on what a Lombard loan is.