Issue link: https://resources.envestnet.com/i/1527631
Securities-Based Line of Credit (SBLOC) – This refers to accessing credit using stocks, mutual funds, exchange traded funds, bonds, etc. as collateral. Securities-based lending provides ready access to capital that can be used for almost any purpose, such as buying real estate, purchasing property like a car or boat, or investing in a business. However, one restriction of a SBLOC to be aware of is that proceeds may not be used to purchase additional securities. It is important for investors to understand the capital accessible via a SBLOC is largely dependent on the underlying risk of the holdings in the associated portfolio. Portfolios with less expected volatility, like a conservative fixed income portfolio, have the potential to qualify for a greater level of borrowing power. Conversely, a portfolio composed of more volatile securities, such as equities, may be limited in terms of borrowing power. Borrowers may benefit from convenient access to capital, lower interest rates compared to unsecured loans, and greater repayment flexibility. Consumer Real Estate Loan – Real estate loans are secured loans with the property listed as collateral, which tends to result in lower interest expenses than other forms of lending. Real estate loans offer a financing option that allows investors to tap into a property's equity to fill liquidity needs. With many housing markets experiencing unprecedented appreciation in value in recent years, unlocking equity in a home, either through a cash-out refinance or home equity line of credit (HELOC), could serve as a suitable option for a client in need of credit. Consumer Unsecured Loan – This loan type is not backed by any collateral, but rather based on a borrower's creditworthiness. In certain circumstances, it may be beneficial for the borrower to use an unsecured loan instead of security sales. While unsecured loans typically carry higher interest expense, they are generally available at minimums below other forms of lending. Additionally, the proceeds can be used for anything from home improvements, luxury purchases, or paying off high interest debt, like credit cards. It is important for investors to understand the capital accessible via a SBLOC is largely dependent on the underlying risk of the holdings in the associated portfolio. Lending Possibilities Leveraging Both Sides of the Balance Sheet to Help Build Wealth l 5 © 2023 Envestnet, Inc.