IBKR (interactive brokers) is the only one I know with the lowest margin interest rates. However, no one should be using portfolio margin unless they know what a margin call is.
Schwab Pledged Asset Line appears to be in third place for most amounts, but really only makes sense if you want to loan over 2.5MM (then the rate is 1.75%.) They won't even let you loan less than 100k. So Schwab barely makes sense, and only if you don't mind the bad rate -and- have over 5MM there, which is a shame, because I otherwise like Schwab.
DeGiro is an excellent option in Europe, with rates rivaling IBKR.
SPX box spreads are another option, but that gets a bit more complicated.
And you're absolutely correct, nobody should use margin unless they know what a margin call is. I would personally only lend some 10-20% of my portfolio max to help with liquidity.
A short explanation of margin, for those who don't know: Normally, the initial margin requirement is 50%, with a 25% maintenance requirement. AKA (assets)/(assets + margin) has to be more than 0.5 to start, but if the value of the assets in the account drop, this is allowed until (assets)/(assets + margin) < 0.25, upon which you face a margin call and must add cash or sell assets. So, with $100 in stock you can loan $100; if the value of the stock goes below $50, you're under the 25% maintenance requirement and you get a margin call. Worth noting that while some brokers give you a few days, IBKR simply auto liquidates, giving you no chance to add cash. (More details here: https://www.elitetrader.com/et/threads/your-experiences-with...) The reason why a margin call/auto liquidation is bad is that this generally happens during a market dip, meaning you are forced to sell your positions at a serious loss, locking that loss in.
There are other risks to borrowing a serious percentage of your assets, however. A margin loan is a unique type of loan where payment in full can be demanded at any time. While this is somewhat rare, brokers do sometimes get spooked for various reasons (external market movements, your own investor profile etc) and will rapidly increase your margin requirements. For example, IBKR recently increased requirements across the board by 35% due to the election. While your bank will always be satisfied with regular mortgage payments and never demand sudden payments, in theory your brokerage could demand the full amount of your margin whenever they wished. That's another good reason to limit your margin to 10% or 20% of your portfolio: if this happened, you would only have to sell that smaller portion.
That said, margin loans are the cheapest form of capital available to most people who own securities AFAIK. So there's that massive advantage. Another advantage is that it can help with taxes: while selling securities is a taxable event, getting a loan on them is not. Keep in mind that if you spend your margin cash on more investments, you can deduct the interest, but you can not deduct margin interest on margin used for personal expenses.
The cost of providing the service isn't huge: there are already systems in place to provide you with money at a broker - the main cost is the systems to automatically sell securities when the value goes down. But that's not _too_ crazy complex.
And it makes a hell of a lot of money. IBKR reported _hundreds_ of millions of dollars of net interest income on customer margin loans in 2019. Those hundreds of millions were made on a net interest margin around 1.7% (an even lower ~1% in 2020!) Traditional loans, people default all the time. But margin loans are collateralized by the securities in the account. For example, you hold 100 shares of Apple in the account, which is the collateral for the margin loan. You can't default: if you try to run away with the cash, well, they have your Apple shares. Really, the only time they lose money is when the value of those securities drops significantly faster than they can sell them, and the borrower racks up a large debt and can't pay it back. But that happens so rarely that the overall program remains very, very profitable.
If you're curious about reading about the times it goes wrong, here's an interesting link [0] describing how users with options lost a lot of money IBKR had to cover - keep in mind that 88MM was what they had to initially cover, and they undoubtedly recovered a lot of that back over time from the borrowing users.
[0] https://www.ft.com/content/01ee0794-158f-40c5-8bb9-82cf5d5f3...
This creates a mixed, more diverse portfolio with lower risk.