My friend recently opened a Scottrade margin account with $5,000 dollars cash. He then saw a link on Scottrade that offered him a line of credit for people with a good credit history. He applied for it and got $20,000. Can someone explain to me what kind of loan this is? Does it work like margin or is it cash loan that interest must be paid on, even if not used? Is there a minimum margin rate on this money? I have never heard of this transaction before. Thanks in advance.
I'm guessing it's just an affiliate offer, from someone like MBNA, Citi, etc. - like a credit card. Didn't he look at the terms? Last I checked, it's unlawful to trade securities using borrowed funds (other than broker-granted margin).