Collateral Loans for US Based Investors

I’ve posted many questions here so time to give something back.

I’m a :us: US Resident so this is purely limited to US residents.

I didn’t want to fund my PT GV investment by selling assets and getting hit with Capital Gains so I looked at various options to get a loan secured by Stocks, etc.

For those with US Home Equity, you might get a better rate/terms with a HELOC.

I looked around and most do this as a variable interests rate Line of Credit tied to one of 3 interest rates, the WSJP (Wall Street Journal Prime Rate), LIBOR (London Interbank Rate) or SOFR (Basically a replacement to LIBOR) which have been 5%+ higher in last 20 years so do your own due diligence, this is the risk of a variable rate.

Essentially the rates in US today are usually 3-4% (you can get < 3%, especially if you have nearly $1m in assets as collateral, even if you only borrow US$400-500k needed for 100% funding of Golden Visa).

The lowest published rates amongst big-name is TD Ameritrade 2.5% + LIBOR (so basically 2.6%) or 3% + LIBOR if your Line of Credit is < $500k

Other providers are: (first rate is 250k+ credit, second rate 500k+ credit)

There’s also a more traditional loan product (like a home/auto loan) where you pay interest + principal over 5/8/12 years. Starting rates from 4.5-5.1%+ - Being a fixed rate/term has it’s pros/cons:

FirstTechFed - Stock Secured Loan

Feel free to report back, so far I’m leaning towards TD Ameritrade.

Disclaimer: This is not investment advice, just links to different loan/lines-of-credit and you should consult your financial provider to see if this is suitable for you.

1 Like

Another interesting deal is “First Republic” have a person loan with a 2.25% FIXED interest rate for 7 years (other terms/rates available). A few hoops (your salary has to go into it, 20% of the loan must stay in the bank for the best rate mentioned)

Loan is limited to $100,000 and cannot be used for investments, but as I understand it (please check current terms) it could be used for:

  • PT Legal Fees
  • PT Immigration Fees
  • Apostille, etc.
  • Your rent repayments
  • Paying off monthly credit card bills
  • Paying taxes
  • etc.

So for anyone financing the EUR 350,000 or whatever, they can get loans just for this amount, and the First Republic could be used to pay everything else and personal expenses (freeing your salary to repay the higher rate loan that funded your investment).

Two additional options along these lines:

For borrowing the funds on margin, Interactive Brokers has the best rates that I’ve seen. They are benchmark rate plus 1%, currently that is 1.08%. You pay BM+1.25% on the first $100k, so a $400k loan would be a mixed rate of ~1.2%. That is a variable rate, so some potential risk if rates go up.

For the HELOC option, for those in the NE US, check out PNC Bank. They have a “Choice HELOC” which has a variable rate (currently ~3%) but you can also choose to lock your rate to be fixed. The fixed rate will depend on the term you want, but 10 year fixed rate is ~2.4% currently.

1 Like

I went with Schwab’s Pledged Asset Line product for this since I already had a large portfolio there and they were willing to match TD Ameritrade’s rates. So far it’s been a great experience and I’m kicking myself for not thinking of this sooner. A few things to be aware of:

  • They do a credit pull since it is basically a variable-rate interest-only loan.
  • It can take up to three weeks to set up and fund an account because they are absolutely swamped with applications. But once it’s done, it’s done and you have it for life.
  • A lot of functionality is not built into the website, for example you have to sign and upload a wire transfer form to withdraw money to your US bank account. Same for setting up autopay.
  • The customer service is excellent! It’s the best among all my investment accounts. They will follow up proactively until your issue is resolved.
1 Like