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2025 Q2: Securities Based Lending

07/30/2025

Sometimes you may need quick access to cash—whether for planned expenses or unexpected ones. A securitiesbased line of credit can give you that access without having to sell your investments. This means you can borrow money using your current investments as collateral (a guarantee), without changing your long-term investment plan. 

We can help you decide if this type of loan is a good fit for your financial goals and help you find the right balance between your short-term needs and long-term plans.

WHAT IS SECURITIES-BASED LENDING?
A securities-based line of credit lets you borrow money using your investments as a guarantee. You don’t have to sell your investments to get the money. This can be a flexible and cost-effective way to get cash when you need it. These loans are often easier to get than other types of loans. You can use the money for many things, like:

  • Home improvements
  • Paying taxes
  • Consolidating debt
  • Paying for college
  • Starting or growing a business
  • Buying luxury items like art, jewelry, or a boat


Important Note: You cannot use this money to buy or trade more investments or to pay back a loan you used to buy investments.

BENEFITS OF A SECURITIES-BASED LINE OF CREDIT:

  • Get access to cash quickly
  • Avoid paying taxes on gains by not selling investments
  • Keep your investment plan in place
  • Usually has lower interest rates than other loans (like credit cards or personal loans)
  • You can choose between variable or fixed interest rates

WHAT ARE THE RISKS?
Borrowing against your investments does come with risks. Some things are out of your control, like market changes. These risks include:

  • If your investments lose value, you might be asked to add more money or sell some investments. This is called a maintenance call.
  • You might face extra taxes if you must sell investments suddenly because of market changes.

HOW DOES IT WORK?
You can borrow a certain amount of money based on the value of your investments. This amount is called the Lending Value. It is a percentage of the total value of your investments and can change at any time.

THERE ARE TWO TYPES OF LENDING VALUES:

  1. Initial Lending Value (ILV):
    This is the maximum amount you can borrow. It also decides if you can add or remove investments from the loan.
     
  2. Maintenance Lending Value (MLV):
    This tells you how much equity (ownership value) you need to keep in your account. If your investments lose value, MLV can help avoid and immediate call. Usually, MLV is higher than ILV.


ASSUMPTIONS:

  1. Long-term capital gains rate of 20%
  2. Investment return of 10%
  3. SBL interest rate of 7.5%
  4. HELOC origination fees of 3%
  5. HELOC rate of 8.25%


This graph is intended for informational purposes only. The examples used herein are for illustrative purposes and are not intended for use in determining future outcomes of any transaction. The information contained herein does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.