A borrow fee is the interest charged for using borrowed capital to trade, distinct from the funding payments perpetual traders exchange with each other. Where funding moves between two traders on opposite sides of a perpetual, a borrow fee is paid to whoever is supplying the asset being borrowed, whether that is a lending pool, a margin facility, or the exchange itself acting as counterparty. Confusing the two is one of the more common mistakes newer leveraged traders make, since both accrue continuously and both show up as a recurring drag on an open position.
Borrow fees are most closely associated with margin trading — buying or shorting an asset using capital borrowed against collateral. On a cross-margin account, borrowed capital draws from a shared collateral pool across a trader's full portfolio; on an isolated-margin position, the borrowing and its associated interest are ring-fenced to a single position, so a loss on that position cannot draw down collateral backing a different one. The choice between the two affects how borrow fees interact with the rest of an account.
Borrow rates on most lending markets move with utilization — the share of a lending pool's available supply that is currently borrowed out. When a large portion of the supply is lent out, the rate rises to attract more lenders and temper borrowing demand; when utilization is low, the rate falls because supply is plentiful relative to demand. This means a borrow fee is not a fixed number set once by the platform — it moves in something close to real time as market conditions shift the balance between traders wanting to borrow an asset and lenders willing to supply it.
Both accrue continuously and both add to the cost of holding a leveraged position, which is exactly why they get confused. The distinction is what each one measures: funding, described in the funding rate explained guide , is a payment between the long and short sides of a perpetual, driven by the gap between the perpetual's price and its index. A borrow fee is interest on capital, driven by supply and demand for that specific asset in a lending market, and it exists independently of whether a perpetual contract is even involved. Many perpetual venues fold the effective cost of financing a position into the funding rate itself and don't itemize a separate borrow charge at all; others, particularly margin-trading platforms, still list borrow interest as its own line.
On a spot margin platform, borrowing is explicit: a trader is literally taking out a loan in one asset to buy or sell another, and the lending market setting that loan's rate exists independently of any derivatives product built on top of it. A perpetual futures contract works differently — leverage is native to the product itself, financed without an external loan, so many perpetual DEXs price the full cost of carrying a leveraged position into a single combined figure, typically the funding rate plus a holding-cost accrual, without itemizing a distinct borrow charge alongside it. The practical effect for a trader is the same either way — leverage has an ongoing carrying cost — but reading a venue's fee schedule correctly means knowing whether that cost is quoted as one bundled number or split across separate borrow and funding lines.
Because borrow rates move with utilization, the same position can cost noticeably more to hold during periods when an asset is in high demand to borrow than during quieter periods, independent of anything the trader themselves is doing. Checking the current rate before opening a position, without assuming it will match whatever it was at the last check, avoids an unpleasant surprise on a longer hold. Isolated margin also helps contain the damage if a borrow-heavy position moves against a trader, since the fee and any resulting loss stay confined to that position.
A trade that looks profitable based on an expected price move alone can stop making sense once borrow costs are included, particularly for a position held over a longer period or opened during a stretch of high utilization on the asset being borrowed. The same discipline applied to funding in the holding cost guide applies here directly: total up every ongoing cost against the expected return before sizing a position. A thesis that only works if borrow costs stay at today's rate for the entire holding period is a fragile one, given how directly those rates respond to shifting market demand. The broader mechanics of using leverage itself, separate from what it costs to carry, are covered in the leverage trading guide .
A borrow fee is the interest charged for using borrowed capital to open a leveraged or margin position, paid to whoever supplies the borrowed asset. It is distinct from a perpetual's funding rate, which is a payment exchanged directly between long and short traders.
Margin interest is another name for the same cost: the ongoing charge for borrowing funds on a margin account, calculated based on how much has been borrowed and how that specific market's lending rate is currently set by supply and demand.
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