Lines Of Credit
Securities-backed Line of Credit
This is a special secured-demand LOC, in which collateral is provided by the borrowers securities. Typically, an SBLOC lets the investor borrow anywhere from 50% to 95% of the value of assets in their account. SBLOCs are non-purpose loans, meaning the borrower may not use the money to buy or trade securities. Almost any other type of expenditure is allowed.6
SBLOCs require the borrower to make monthly, interest-only payments until the loan is repaid in full or the brokerage or bank demands payment, which can happen if the value of the investors portfolio falls below the level of the line of credit.