A line of credit (L/C, LOC) that is extended to a client with assets (securities)- eligible securities– that can be posted as collateral. It is a type of securities based borrowing provides potential to access the value of a borrower’s assets or investments as a support (backing) to borrowing. This way, a borrower may not need to sell such assets in order to secure funding.
A borrower can have Access to money at the time of need, potentially avoiding payment of capital gains taxes if its assets would otherwise be sold off. As a type of credit, it bears lower interest rates compared to other forms such as unsecured loans, credit cards, etc. Furthermore, it allows a borrower to secure an amount commensurate to the good part of the collateral value.
Unlike typical forms of credit, securities-based line of credit requires no arrangement fees, non-use or cancellation fees, and so on.
