SBLOC: extra cash by borrowing against assets

[EL0NTRK]

Have been talking to a few brokers and their affiliates, here is what I found so far.
TD Ameritrade offers LOC through a few lenders they work with. Here in TX, it's TD Bank or Tristate Bank. Tristate banks will not offer LOC if use 100% TSLA stocks as collateral.
So it's a no for me.

Wells Fargo give me a 1.75%, still good but not great. You can get up to 60% of your assets value.

 

[2daMoon]

Update on Fidelity and IBKR. (two hours on hold for Fidelity; call back in five minutes for IBKR)

Fidelity won't match IBKR Margin rate, and they offered a 1.5% discount, taking the default 6.825% for my account size down to 5.325%, which was nothing to write home about compared to IBKR. Fidelity will lend up to 40% of collateral for an account with mostly (99%) TSLA shares.

IBKR is ~1.24% - 1.55% and they will lend up to 25% against a TSLA portfolio using their "Pro" account.

My comfort zone aims to avoid borrowing more than 30% of collateral for living expenses while the shares grow, so IBKR should work well for this. I'll move shares enough from Fidelity to allow for a little more than what I intended to borrow for the first year of retirement. With any luck TSLA will grow enough to allow this to cover expenses for a second year, supplemented by another share transfer from Fidelity if needed.

Lather, rinse, repeat for three years before considering any distributions of TSLA gains. This, plus Social Security will provide a 10%-15% pay raise vs. remaining employed, as well as the possibility of a 0% tax rate for the second and third year. By the time I begin taking distributions that should double the old salary.

 

[juanmedina]

You must have negotiated that rate, as their published margin rates, which are based on balance, not collateral, are much higher: 5.45%-8.95%. While the SBLOC rates are: 2.191%-5.495%.

Say for example you have $1,000,000 of stocks and you want to borrow $45k for living expenses. The margin rate would be 8.45% while the SBLOC rate would be 2.953%. (Both of those are the published "rack rates.")

Yeah I did negotiate a lower 1.94% margin rate. I assume the SBLOC rate can be negotiated as well.

 

[winfield100]

Here are links to a few offerings from different brokers:

• Securities Based Lending - Collateral Lending | TD Ameritrade
• Pledged Asset Line® | Schwab Bank | Charles Schwab
• Loan Management Account (LMA) Solutions from Merrill Lynch
• E*TRADE Line of Credit
• Interactive Brokers Margin Rates (I couldn't find information on a normal SBLOC offered by them.)

Notes:

• Most of them set a single rate based on the worth of the assets they are secured against, while IB sets the rate based on how much you have borrowed in tiers. (So with IB you always pay the highest rate for the first $100k.)
• TD Ameritrade and Charles Schwab are essentially the same company but have different rates.
• E*TRADE currently lets you borrow up to 55% against TSLA.

Also, you can use them against each other. For example find the broker with the lowest rate for the worth of your assets and ask your preferred broker, if it is different, to beat or match the rate.

@MP3Mike
did some looking at PAL's from Schwab
No fees!! hurray!
TANSTAAFL (there aint np such thing as a free lunch)

heres the rub
It's not a fee, its "compensation"
"......Your Schwab Financial Consultant and Schwab Bank Regional Banking Manager may receive compensation in connection with the PAL at Schwab Bank. The compensation provided to a Schwab Financial Consultant is determined based on the utilization of the PAL, and is paid on a one-time basis or on a periodic basis during the life of the PAL. The compensation provided to a Schwab Bank Regional Banking Manager is made as a single payment in connection with the opening of the PAL, is determined based on the loan value of collateral pledged in support of the PAL, and determined by Schwab Bank at the origination of the PAL, and does not exceed $5,000 per PAL........"

 

[MP3Mike]

FYI: E*TRADE currently has a promotion for a 0.5% rate reduction on their line of credit...

 

[Tyler34]

Have been talking to a few brokers and their affiliates, here is what I found so far.
TD Ameritrade offers LOC through a few lenders they work with. Here in TX, it's TD Bank or Tristate Bank. Tristate banks will not offer LOC if use 100% TSLA stocks as collateral.
So it's a no for me.

Wells Fargo give me a 1.75%, still good but not great. You can get up to 60% of your assets value.

Who did you end up going with for this loan? Looking for one myself and it looks like you did your homework.

 

[EL0NTRK]

Who did you end up going with for this loan? Looking for one myself and it looks like you did your homework.

Morgan Stanley Wealth Management. You got a team assigned to you. Well, consider the value of the portfolio.
If you have a 5M minimum in your portfolio value even if it's single stock, they can lend you up to 65%. You can deal with them.
Rate has been creeping up but it's under 1.5% APR at the moment.
When TSLA dropped to 700s, it was a bit scary but as the stock recovers, I think it's the best way to hang into your stocks and get the money out for other purposes.

 

[FastEddieB]

I have a “Loan Management Account“ with Merrill Lynch. It uses the securities in our Cash Management Account as collateral against what we borrow. Handy in that it has conventional checks you can write.

When our M3LR arrived with no notice, it was a handy way to pay for it immediately while other funds got moved around to cover it. But being a conservative investor, I never buy on margin. Leverage can be great - until it moves against you.

 

[TSLA Pilot]

I have a “Loan Management Account“ with Merrill Lynch. It uses the securities in our Cash Management Account as collateral against what we borrow. Handy in that it has conventional checks you can write.

When our M3LR arrived with no notice, it was a handy way to pay for it immediately while other funds got moved around to cover it. But being a conservative investor, I never buy on margin. Leverage can be great - until it moves against you.

Yes, margin can be dangerous and nerve-wracking--ask me how I know.

That said, a small amount could have been stunningly useful in your own investment history I suspect. Imagine if you had, for example, borrowed against a small portion of your shares (10%) to buy shares when it reached the $700's . . . .

Margin is a tool; it can be used with great effect if used wisely.

 

[GatorMeat]

Curious as to what happened to everyone buying houses with floating rate loans against their $TSLA instead of just selling shares or getting a mortgage? I assume this played a role in the stock dropping to $105 a year ago.
I use my margin to 'flip' real estate, so I am careful how much I use and it's only for a few months max. With rates up, now I don't really use it and keep more cash on hand