5.15How does borrowed money work?
1What is it?
The broker pays the part of the purchase you didn’t pay. You owe that amount until you repay or sell.
2Why does it exist?
Loans have a cost (interest) and conditions (collateral and margin requirements).
3Diagram
- Your money ₹25,00025%
- Broker loan ₹75,00075%
4Quick revision
- You owe the funded amount.
- Interest accrues until repaid.
- Selling repays the loan first.
5Knowledge check
Q1. When you sell an MTF position, what is paid first?Show answer
The broker’s loan and interest.
Q2. Do you still owe the loan if the shares fall?Show answer
Yes, the full loan amount.
Q3. Can you repay the loan by adding cash?Show answer
Yes, usually.