Securities Backed Line of Credit (SBLOC) | Lending Solutions | Fidelity (2024)

FAQs

What is the difference between a HELOC and a Sbloc? ›

Generally speaking, SBLOCs function similar to a home equity line of credit: You can draw funds from your line of credit, pay it down, and draw funds again. However, SBLOCs are non-purpose loans, which means they do not have to be tied into a specific purpose.

SBLOCs are a type of securities-based lending offered to investors. Other types include stock-based loan programs. Set up as a revolving line of credit, an SBLOC allows you to borrow money using securities held in your investment accounts as collateral.

SBLOCS give brokerage firms such as LPL Financial and Goldman Sachs, Merrill Lynch, Wells Fargo, Morgan Stanley, JP Morgan, and UBS the opportunity to cross-sell banking products, add new streams of revenue, and charge interest payments against the borrowed amount.

Tip: SBLOCs are best used for shorter term funding needs (generally anything from a few months to a few years in duration). Longer term financing needs (e.g., purchasing a home) are generally done differently, often using fixed rate loans.

The interest on the loan is potentially deductible, especially if the loan is used to generate taxable income through, for example, improvements to a rental property or purchasing equipment for a business.

Another appropriate time to use an SBLOC could be for a down payment on a new house. If you are buying a new house but aren't in the position to wait until your old house sells, you can use an SBLOC to get cash for a down payment.

Notably, Vanguard does not offer an SBLOC. You'll see as you read about the options that the interest rates are generally quite low. The more stocks you pledge to the SBLOC, the lower the interest rate offered.

One way to have cash ready when you make an offer to purchase a residence is to borrow secured by other assets. If you own securities in a PNC Private Bank investment account, you can quickly borrow cash secured by the value of those securities through a Quick Link Portfolio (QLP) line of credit.

The essentials: Using a home equity loan for investments

Tapping into your equity is possible with a home equity loan, home equity line of credit (HELOC), and cash out refinance. You can use your equity to finance investments, including using home equity toward an investment property, stocks, bonds, or mutual funds.

Can I get a loan using stock as collateral? ›

One of the lesser-known benefits of a brokerage account is what's called a portfolio line of credit, also known as a margin loan. With a portfolio line of credit your broker will lend you money against the value of your securities portfolio, using your stocks, bonds and funds as collateral for the loan.

Yes, you can take out A Loan against Shares, a type of secured loan where your shares act as collateral.

An SBLOC does not impact monthly credit reporting.

Potential downsides include high interest rates, late payment fees, and the potential to spend more than you can afford to repay.

As noted above, SBL offers access to cash within a couple of days at lower interest rates with a great deal of repayment flexibility These rates are often much lower than home equity lines of credit (HELOCs) or second mortgages.

If you know exactly how much you need to borrow, a home equity loan can be a better option than a HELOC. Home equity loans tend to have lower interest rates than HELOCS, and the rates are usually fixed for the life of your loan.

The cons are that HELOCs use your home as collateral, they can make it easy to overspend, and they have variable rates that can rise.

A home equity line of credit is a revolving credit line that allows the borrower to take out money against the credit line up to a preset limit, make payments, and then take out money again. A HELOC allows you to use it as needed as long as you make your payments. The credit line remains open until its term ends.