Author Topic: Suggestions for places to use mutual funds as secured loan collateral?  (Read 3126 times)

not_a_trex

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I'm looking to take out a personal loan and am trying to see if I can leverage some of my saved mutual funds as collateral to grab a lower interest rate. My bank offers stock secured personal loans, but the collateral has to be a publicly traded stock and not a mutual fund or ETF. Are there US banks or credit unions that accept mutual funds as collateral for a loan?

Travis

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Re: Suggestions for places to use mutual funds as secured loan collateral?
« Reply #1 on: January 23, 2018, 09:38:48 AM »
This is still a thing? I thought it died off long ago after the 1929 crash.  Folks used to buy stock on margin and used the stock itself as collateral.  Banks were left high and dry when both the loan defaulted and the stock ended up worthless. If I were a bank I certainly wouldn't do it.  The fund could end up worth far less than the loan if the bank ever needed to cash it in.

anotherAlias

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Re: Suggestions for places to use mutual funds as secured loan collateral?
« Reply #2 on: January 23, 2018, 03:52:21 PM »
This is still a thing? I thought it died off long ago after the 1929 crash.  Folks used to buy stock on margin and used the stock itself as collateral.  Banks were left high and dry when both the loan defaulted and the stock ended up worthless. If I were a bank I certainly wouldn't do it.  The fund could end up worth far less than the loan if the bank ever needed to cash it in.

Yep still done quite a bit.  If I remember correctly the bank I worked for offered to private banking clients

Hargrove

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Re: Suggestions for places to use mutual funds as secured loan collateral?
« Reply #3 on: January 23, 2018, 08:49:04 PM »
Lightstream loans have head-scratchingly low rates if you have excellent credit.

You could buy a CD with the funds and use that as collateral instead.

You're looking for something called an "SBLOC." You can also get "non-purpose loans" (margin loans not used to purchase more securities).

https://saf.wellsfargoadvisors.com/emx/dctm/Marketing/Marketing_Materials/Image/e7732.pdf
https://www.schwab.com/public/schwab/banking_lending/pledged_asset_line.html

not_a_trex

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Re: Suggestions for places to use mutual funds as secured loan collateral?
« Reply #4 on: January 24, 2018, 11:13:25 AM »
Thanks Hargrove. I'll take a look.

For those that think taking out a security backed loan is a bad idea, would you not do it with any collateral (eg stocks, house) or is the concern mostly targeted at securities because they can be volatile? I'm trying to understand that is particularly risky about a security backed personal loan. The risk of the lender forcing a sale would be present with any collateral, but it's still a common practice to take out a mortgage to purchase a home.

 

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