Personal Resource Center

The Pros and Cons of Borrowing Against Your Securities

Money icon
Tip: Consider a securities loan if the return on your investments is significantly greater than the interest you'll be charged.

What are the downsides to securities loans?

A portfolio loan or line of credit isn't right for everyone. Here are some downsides to consider:

  • The bank will put a hold on your collateral. While your investment account will continue to earn interest and dividends, you may not be able to withdrawal large amounts from your collateral account without paying off your loan first. Depending on your loan amount, that could lock in a large percentage of your assets.
  • If the value of your collateral declines, the lender can call the loan.6 This means you'd be asked to pay off the loan or deposit more money into the account. If you are not able to do either of these, the bank can sell your collateral without your approval.
  • Securities loans are usually at a variable interest rate. While interest rates are very low right now, but they may not stay that way. If they go up, the amount you owe could be more than you expected to pay.

Keep in mind, portfolio loans don't allow you to use assets in a retirement account as collateral. For that, you should look into borrowing from your 401(k).

Securities loans can be a good deal if you have plenty of collateral that you don't need or want to sell in the near future. But be cautious. These loans aren't for everyone. Consider your individual situation before you decide. A trusted Synovus adviser can help you decide if this type of loan is right for you.

Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. SEC.gov, "Investor Alert: Securities Backed Lines of Credit," updated February 6, 2017, accessed January 27, 2022. Back
  2. IRS.gov, "Topic No. 409 Capital Gains and Losses," updated January 11, 2022, accessed January 27, 2022. Back
  3. CMS.gov, "2022 Medicare Parts A & B Premiums andDeductibles/2022 Medicare Part D Income-Related Monthly AdjustmentAmounts," published November 12, 2021, accessed December 6, 2021. Back
  4. Ben Luthi, "What Is Securities-Based Lending?" U.S. News & World Report, published July 1, 2021, accessed January 28, 2022. Back
  5. Julia Kagan, "Tax Deductible Interest," Investopedia, updated April 29, 2021, accessed January 28, 2022. Back
  6. Tiffany Lam-Balfour, "Securities-Based Lines of Credit: What to KnowAbout SBLOCs," Nerdwallet, published December 6, 2021, accessed January 28, 2022. Back