SEC.gov | Investor Alert: Securities-Backed Lines of CreditSome perspective: in 2016 I sold 200 pre-split shares (now 1000) to for a downpayment on my model s. This year it is going to become a million dollar car. HODL
What Are SBLOCs?
SBLOCs are loans that are often marketed to investors as an easy and inexpensive way to access extra cash by borrowing against the assets in your investment portfolio without having to liquidate these securities. They do, however, carry a number of risks, among them potential unintended tax consequences and the possibility that you may, in fact, have to sell your holdings, which could have a significant impact on your long-term investment goals.
How Do SBLOCs Work?
SBLOCs are non-purpose loans, which means you may not use the proceeds to purchase or trade securities. However, an SBLOC still provides a fair amount of flexibility when you consider the restrictions on other types of loans, such as a mortgage or auto loan, or borrowing on margin. Those types of loans all require that loan proceeds be used for a specific purpose. Money from an SBLOC can be used to finance virtually anything you might want, from home renovations and real estate purchases, to personal travel or a new business venture. They also can be used, for example, to fund education expenses or to pay an unexpected tax bill.
But remember: The fact that you might be eligible for an SBLOC doesn’t mean the loan is necessarily a good idea. And be aware that SBLOCs are just one type of securities-based lending offered to investors. Other types include margin and stock-based loan programs.
SBLOCs are loans that are often marketed to investors as an easy and inexpensive way to access extra cash by borrowing against the assets in your investment portfolio without having to liquidate these securities. They do, however, carry a number of risks, among them potential unintended tax consequences and the possibility that you may, in fact, have to sell your holdings, which could have a significant impact on your long-term investment goals.
How Do SBLOCs Work?
SBLOCs are non-purpose loans, which means you may not use the proceeds to purchase or trade securities. However, an SBLOC still provides a fair amount of flexibility when you consider the restrictions on other types of loans, such as a mortgage or auto loan, or borrowing on margin. Those types of loans all require that loan proceeds be used for a specific purpose. Money from an SBLOC can be used to finance virtually anything you might want, from home renovations and real estate purchases, to personal travel or a new business venture. They also can be used, for example, to fund education expenses or to pay an unexpected tax bill.
But remember: The fact that you might be eligible for an SBLOC doesn’t mean the loan is necessarily a good idea. And be aware that SBLOCs are just one type of securities-based lending offered to investors. Other types include margin and stock-based loan programs.
The quoted passages above are just a part of a much longer, more detailed article at the link above. They emphasize the benefits and risks of SBLOC (Securities-Backed Lines of Credit) loans, while providing links to alternative methods of financing.
IMO, makes sense to explore these finacial options before selling a fast-appreciating asset like TSLA.
Cheers!