What is ‘Day Loan’
A temporary transfer of funds from a bank to an individual broker or a brokerage firm that is made early in the day for the purchase of securities that same day. The securities serve as collateral for the day loan, which must be repaid by the end of the day.
Also called a “morning loan”.
Explaining ‘Day Loan’
A day loan is a source of very short-term funding. Once the securities have been purchased, the loan becomes a regular broker call loan, and may become due at any time. Brokers must pay a daily interest rate, known as the “call rate”, on these loans.
Further Reading
- Payday loans and credit cards: New liquidity and credit scoring puzzles? – pubs.aeaweb.org [PDF]
- Remembering to pay? Reminders vs. financial incentives for loan payments – www.nber.org [PDF]
- Financial literacy and financial behavior: Assessing knowledge and confidence. – search.ebscohost.com [PDF]
- Monitoring by financial intermediaries: Banks vs. nonbanks – link.springer.com [PDF]
- Do bank loan relationships still matter? – www.jstor.org [PDF]
- Discount window stigma during the 2007–2008 financial crisis – www.sciencedirect.com [PDF]
- Fear and greed in financial markets: A clinical study of day-traders – pubs.aeaweb.org [PDF]
- Stigma in financial markets: Evidence from liquidity auctions and discount window borrowing during the crisis – papers.ssrn.com [PDF]
- Banks and loan sales marketing nonmarketable assets – www.sciencedirect.com [PDF]
