Day loan

A day loan, also known as a morning loan, is a kind of short-term loan which banks provide to brokers pending the availability of securities. Once the securities are delivered and thus made available, they then function as collateral. In such a situation, the loan is converted into a regular call loan. As such, the loan becomes due by the end of the day.

In order to secure a day loan, a broker should first determine which securities to purchase. With this information, he can then go to the bank and ask for financing. This is usually done in the morning, hence the alternative term used for this type of loan.

Once the bank is done reviewing the securities and the status of the broker, the loan may be approved. The funding is then used to purchase the securities, so that they are set to be transferred to the broker. Once the transfer is complete, the broker contacts the bank to inform them of the development. Once this is done, the bank converts the day loan into a standard call loan. The day loan is then considered settled.

Call loans are usually used by brokers to facilitate security purchases over a long period of time. These loans may be paid off by using the revenue generated by the purchased securities.

Taking out day loans is a strategy which enables brokers to act fast when a profitable deal is identified. This is a relatively straightforward process, especially when the securities identified do seem particularly promising.