Securities-Based Lending

  • You may be able to tap the value of your investments to meet borrowing needs.
  • Borrowing doesn’t have to disrupt your investment strategy.
  • Securities-based lines of credit have been growing in popularity. They’re flexible and often relatively easy to get.

Financial flexibility through borrowing

Have you ever considered tapping the value of your investment account for borrowing? Securities-based borrowing gives you access to money based on the value of your own securities.

Have you ever considered tapping the value of your investment account for borrowing?

It may not be necessary to disrupt your investment plan to meet common borrowing needs. That depends on the type of investments you own, how much you want to borrow, and for what purpose.

Securities-based loans defined

A securities-based line of credit helps you to meet your liquidity needs by unlocking the value of your investments.

This type of borrowing may be easier to obtain and more cost-effective than other alternatives. It depends on whether you have sufficient eligible securities to use as collateral.

Some of the advantages of securities-based borrowing include:

  • Access to cash when you need it
  • Typically lower rates than other forms of credit
  • No set-up, non-use, or cancellation fees
  • Ability to borrow between 50% to 95% of your eligible assets, depending on the collateral and type of credit you receive

These lines of credit can be used for many purposes. Common uses include:

  • Home renovation
  • Real estate purchase1
  • Expenses such as taxes or tuition
  • Boat, car, or other luxury purchase
  • Business opportunity

You can use a non-purpose securities-based line of credit for any purpose except to purchase, carry, or trade securities; refinance or repay margin loans; or repay any other loan used for securities purchases. A margin account is the only securities-based line of credit you may use to purchase securities.

Alternatives for securities-based borrowing

Wells Fargo Advisors provides access to the following securities-based borrowing alternatives:

Product Description
Margin Account2 Priority Credit Line Secured PrimeLine® Line of Credit Custom Loans
Product Description  

A convenient financing source to pursue investment opportunities or to meet other personal financing goals offered through Wells Fargo Advisors

A line of credit backed by your eligible securities offered through Wells Fargo Advisors

A line of credit backed by your eligible securities offered through Wells Fargo Bank

Customized loans or lines of credit with flexible advance rates and terms offered through Wells Fargo Bank

Borrowing Need3
Margin Account2 Priority Credit Line Secured PrimeLine® Line of Credit Custom Loans
Borrowing Need3  

Any amount

Any amount; generally for $100,000 to $1 million

$250,000 minimum; generally for $500,000 to $5 million

$1 million minimum; generally for $5 million and up

Fund Access
Margin Account2 Priority Credit Line Secured PrimeLine® Line of Credit Custom Loans
Fund Access  

Check, check card, and wire transfer4

Check, online, ACH, and wire transfers

Check, online transfer, and wire transfer

Wire transfer

Uses
Margin Account2 Priority Credit Line Secured PrimeLine® Line of Credit Custom Loans
Uses  

Anything including to purchase securities

Anything except to purchase securities or pay down margin

Anything except to purchase securities or pay down margin

Anything except to purchase securities or pay down margin

Typical loan-to-value
Margin Account2 Priority Credit Line Secured PrimeLine® Line of Credit Custom Loans
Typical loan-to-value  

50-90% based on asset class

60%-90% based on asset class

50% - 95% based on asset class and underwriting option

50% - 95% based on asset class

Term
Margin Account2 Priority Credit Line Secured PrimeLine® Line of Credit Custom Loans
Term  

No set expiration

No set expiration

60 months

Varies

Interest Rate Index
Margin Account2 Priority Credit Line Secured PrimeLine® Line of Credit Custom Loans
Interest Rate Index  

Wells Fargo Advisors’ Base Rate see rates below

Wells Fargo Advisors’ Base Rate see rates below

Wells Fargo Bank’s Prime rate or LIBOR

Wells Fargo Bank’s Prime rate or LIBOR

Payment Required
Margin Account2 Priority Credit Line Secured PrimeLine® Line of Credit Custom Loans
Payment Required  

No minimum monthly interest payment required

No minimum monthly interest payment required

Monthly interest only

Monthly interest only

Underwriting Requirement
Margin Account2 Priority Credit Line Secured PrimeLine® Line of Credit Custom Loans
Underwriting Requirement  

Collateral review

Collateral review

Collateral and borrower review

Collateral and borrower review

Carefully consider whether securities-based borrowing is right for you:

Securities-based borrowing has special risks and is not suitable for all investors. There may be times when market activity causes the value of pledged securities to decline. If the value drops below required levels, you may be required to pay down your line of credit or pledge additional eligible securities. Otherwise, the firm may require the sale of some or all of the pledged securities. The sale of pledged securities may cause adverse tax consequences.*

Borrowing against investments is not without risks

Remember you are pledging securities whose value is impacted by events outside your control.

Remember you are pledging securities whose value is impacted by events outside your control. The risks of securities-based borrowing include:

  • Market fluctuations that may cause the value of pledged assets to decline
  • A decline in the value of your securities that could result in selling your securities to maintain equity
  • Adverse tax consequences as a result of selling securities*

*Wells Fargo Advisors and its affiliates are not tax or legal advisors.

Interest rates remain low

Interest rates have remained low and many people find the value of their equities has moved up. That’s why securities-based loans have been growing in popularity.

Wells Fargo Advisors, LLC, Priority Credit Line Interest Rates

Household Assets Under Management Interest Rate
<$250k Base Rate + 0.75%
$250k<$500k Base Rate - 0.75%
$500k<$1MM Base Rate - 1.25%
$1MM<$2.5MM Base Rate - 1.75%
$2.5MM<$5MM Base Rate - 2.25%
$5MM+ Base Rate - 2.75%

Wells Fargo Advisors, LLC, Margin Interest Rates*

Margin Debit Balance Standard Rates
$0 to $24,999.99 Base rate + 3.50%
$25,000 to $49,999.99 Base rate + 3.00%
$50,000 to $99,999.99 Base rate + 2.50%
$100,000 to $249,999.999 Base rate + 2.00%
$250,000 to $499,999.99 Base rate + 1.50%
$500,000 to $999,999.99 Base rate + 1.00%
$1,000,000 to $4,999,999.99 Base rate + 0.50%
$5,000,000 to $9,999,999.99 Base rate + 0.00%
$10,000,000 and up Base rate - 0.50%
Cash Account Base rate + 3.50%, regardless of debit size or household assets under management

 

Household Assets Under Management Adjuster
< $250,000 0%
$250,000 to $499,999.99 - 0.5%
$500,000 to $999,999.99 - 1.00%
$1,000,000 to $2,499,999.99 - 1.50%
$2,500,000 to $4,999,999.99 - 2.00%
$5,000,000 and up - 2.50%

Base rate as of Dec 17, 2015 = 5.750%

The Base Rate is set at our discretion with reference to commercially recognized interest rates, industry conditions relating to the extension of margin credit, and general credit market conditions. The annual rate of interest will change without prior notice to you, in accordance with changes in our Base Rate.

1 Financing real estate with a securities-based line of credit carries risk and may not be appropriate for your needs. A complete assessment of your circumstances is needed to help you determine which type of loan provides the best fit. All loans are subject to credit approval. Wells Fargo & Company and its affiliates do not provide tax or legal advice. Please consult your tax or legal advisors to determine how any credit may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.

2 Margin borrowing may not be suitable for all investors. When you use margin, you are subject to a high degree of risk. Market conditions can magnify any potential for loss. The value of the securities you hold in your account, which will fluctuate, must be maintained above a minimum value in order for the loan to remain in good standing. If it is not, you will be required to deposit additional securities and/or cash in the account or securities in the account may be sold.

3 Subject to minimum equity requirements.

4 Command checks and debit cards are only available through the Command Asset Program.

Secured PrimeLine, Secured Term Loan, and Custom Loans are offered by Wells Fargo Bank, N.A. (member FDIC), a banking affiliate of Wells Fargo & Company. Other banking services from Wells Fargo Bank, N.A., and its affiliates are available through the Lending & Banking Services Group of Wells Fargo Advisors. All loans and lines of credit are subject to credit approval, verification, and collateral evaluation. Initial credit decision is subject to your meeting specific underwriting requirements, and final approval will be based upon your satisfying these requirements. Certain restrictions apply. Programs, rates, terms, and conditions are subject to change without advance notice. Products are not available in all states.

Wells Fargo Advisors, LLC, or Wells Fargo Advisors Financial Network, LLC, as applicable, will act as broker-dealer, and First Clearing, LLC (“FCC”), will act as lender and carry Margin and Priority Credit Line Accounts. FCC is a separate, registered broker-dealer, Member SIPC, and non-bank affiliate of Wells Fargo & Company.

Securities-based lending has special risks and is not suitable for everyone. If the market value of your pledged securities declines below required levels, you may be required to pay down your loan or line of credit or pledge additional eligible securities in order to maintain it, or the lender may require the sale of some or all of your pledged securities. The sale of your pledged securities may cause you to suffer adverse tax consequences. You should discuss the tax implications of pledging securities as collateral with your tax advisor. Wells Fargo Advisors and its affiliates are not tax or legal advisors. All securities and accounts are subject to eligibility requirements.

Please read all lines of credit documents carefully. The proceeds from some securities-based lines of credit may not be used to purchase additional securities, pay down margin, or to pay premiums for variable life insurance policies or for insurance products offered by Wells Fargo and any of its affiliates, including life, disability, long-term care, personal or commercial property, casualty, and liability insurance products. Securities held in a retirement account cannot be used as collateral to obtain a loan. Securities purchased in the pledge account must meet collateral eligibility requirements. Other account fees, fund expenses, brokerage commissions, and service fees may apply.

Next steps

  • Look into the types of securities-based line of credit alternatives.
  • Find out how much you can borrow relative to the value of your investment account.
  • Understand the risks associated with pledging securities for the term of the loan.
  • Explore current interest rates, the cost to borrow, and the effect on borrowing costs should interest rates rise.

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