What are the Advantages of SBLs over margin loans offered by my stock brokerage?
• Many more publicly-traded securities are eligible for SBLs than margin loans; • Maximum Loan-T0-Value ratios for SBLs are 80% versus 50% for most margin loans; • Interest only payments, generally due quarterly, are required for SBLs whereas principal and interest payments are required for margin loans; • Margin loans are subject to “margin calls” if the value of the securities in your margin account decreases below a certain point which then requires you to deposit more cash or securities into the margin account or sell off some of the securities; no such “calls” will ever occur with a SBL • Finally, and the biggest advantage of SBLs, occurs at the end of the loan term when you have the choice of either (i) paying off the loan and receiving the securities back or, (ii) since it is a “non-recourse” loan, not repaying the loan and electing to forfeit the securities to the lender without any liability to you or any effect on your credit rating.
