To be sure, it's risky to borrow against the value of your securities, because the money borrowed accentuates your losses if your investments fall in value. Still, this strategy has three potential advantages. First, you can leave your portfolio in place, so that it can potentially continue to grow. Second, you can avoid selling securities, which could trigger capital-gains tax bills. Finally, because the loan is backed by your portfolio's value, the interest charged will be lower than for an unsecured loan.
Working with your Financial Advisor, you may be able to pledge marketable securities, including stocks, corporate bonds, government bonds, mutual funds and other financial instruments, for a loan, line of credit or other borrowing. You may even be able to borrow against control and restricted stock, as well as other non-margin eligible securities.
- Portfolio Line of Credit. This our quickest and easiest way to borrow against the value of your portfolio for just about any personal or business use, other than to purchase additional securities.
Not sure that a securities-backed loan is right for you? Talk to your Financial Advisor about the pros and cons. As an alternative, you could also explore a home-equity loan or line of credit. But these may take longer to set up than a loan tied to your portfolio's value. However, all three types of loans have risks and fees, so be sure to consult your advisor before taking out any type of loan to understand all the terms and conditions.