Purpose credit

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Purpose credit

Credit used for the purpose of buying, carrying or trading in securities.

Purpose Credit

Money that an investor may borrow from a broker in order to buy securities. Purpose credit is secured by cash and/or securities in a margin account. An investor who buys with purpose credit can realize huge gains if the price of the security moves in a favorable direction; however, he/she also takes on a great deal of risk because it may not move in such a direction. Purpose credit is also called a margin loan. See also: minimum maintenance, margin call, nonpurpose loan.