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Tablet Portfolio
Josh Orton, CFP®Jun 5, 2025 5:58:43 PM2 min read

Uses for a Securities-Backed Line of Credit

Uses for a Securities-Backed Line of Credit
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Investors seek out capital for a myriad of reasons, and lenders are certainly capable of offering financing to investors in many ways.

 

What Is a Securities-Backed Line of Credit (SBLOC)?

One of those ways is via a securities-backed line of credit (SBLOC), which is a loan product using your investments as collateral to establish a revolving line of credit with a lender. An SBLOC is similar to a home equity line of credit (HELOC), but it utilizes investments as collateral rather than a home.

Some finer points of SBLOCs include:

  • Repayments are interest-only and are typically auto-drafted monthly from a linked checking account.
  • The size of the line of credit depends on the value of the investments and the investment “array,” or asset allocation. This typically results in a line of credit equal to 50-70% of the investments.
  • Investments must be owned in a non-retirement account.
  • The line of credit is revolving, meaning you can withdraw funds, repay them, then withdraw funds again.
  • The interest rate charged is typically based on the Secured Overnight Financing Rate (SOFR) plus a spread charged by the lender.


Why Consider an SBLOC?

The primary benefit of a securities-backed line of credit is the ability to access capital without selling investments that may have large unrealized gains, thereby avoiding (or at least delaying) a potential costly tax bill. Borrowing costs tend to be lower than other loan products because there are typically no setup or pre-payment fees, and the process to establish an SBLOC is typically quicker compared to other loan products. Additionally, an SBLOC does not impact your monthly credit reporting.

 

Risks and Considerations

There are several drawbacks to SBLOCs that investors must consider before diving into the process. Chiefly, the interest rate used is floating, meaning that a rising interest rate environment would increase the cost of borrowing. Additionally, market volatility can lead to a decline in the value of the investments, which could cause the investments to no longer support the outstanding line of credit obligations. In this case, a maintenance call would be issued to either deposit additional assets or liquidate investments.

Funds received via an SBLOC may be used for many reasons, including but not limited to:

  • Short-term/bridge financing
  • Real estate purchase or renovation
  • Liquidity for business needs
  • Large, planned personal expenses or business investment
  • Tax payments

The process of comprehending how a securities-backed line of credit works and determining if one is suitable for your situation is complex. Working with your trusted advisor at LGT Financial Advisors will help you understand your options and determine which is best for you. Please contact your dedicated team today with any questions.

 


 

To learn more, contact one of our trusted advisors.

 

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Josh Orton, CFP®
Josh joins LGT Financial Advisors with over 13 years of experience in the wealth management industry. He holds his CERTIFIED FINANCIAL PLANNER™ certificate in addition to his Series 65 and Insurance licenses. Prior to LGT, Josh held positions as a planner and advisor at TD Ameritrade and other boutique Registered Investment Advisor firms in DFW. As a Senior Financial Advisor, Josh focuses on helping clients develop comprehensive financial plans and coaching them through the wealth management process. Josh obtained a Bachelor of Business Administration degree in Finance from the University of North Texas. When he is not busy helping his clients navigate the complex world of money management, Josh enjoys coaching his kids’ soccer and tee-ball teams, grilling, watching football, and home improvement projects.
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