By Clifton E. Clark, JD, MBA

Investment-Secured Loans and Lines of Credit

Strategic-Use-of-Credit-2One of the most important—but often overlooked—tools for effective wealth management is the strategic use of credit. When used as part of a comprehensive, integrated financial plan, strategic credit helps clients stay on course to achieve their wealth accumulation, retirement and estate planning goals.

Carefully structured credit solutions can also allow high net worth individuals to significantly leverage their assets by taking advantage of business or real estate investment opportunities in a timely manner.

The basic building blocks for effective use of credit are the mortgage, the home equity line of credit and the margin line, commonly used to help clients leverage their investment portfolio for further securities purchases. As a sum, these three products solve many client needs; however, there are situations that require more customized credit structures.

In many cases, strategic credit solutions incorporate the use of a bank-originated, investment-secured loan or line of credit. These instruments can be secured by many types of investments, including—but not limited to—stocks, corporate bonds, municipal bonds, mutual funds, certificates of deposit and cash value of life insurance.

Investment-secured loans and lines of credit allow you to:

  • Borrow a larger percentage of the equity of investments than with a margin line
  • Borrow against a wider variety of investments than with a margin line
  • Structure the loan or line of credit in a way that matches the size and timing of the borrowing need

Often, it is the timing, and not the amount of cash needed, that necessitates a strategic solution. Strategic credit solutions can be catered for some of life’s more common cash needs: quarterly or annual taxes, a wedding, education, the purchase of additional real estate or a business investment opportunity.

Loans and lines of credit secured by investments often have significant advantages:

  • Investment assets are not sold, so you maintain your investment plan while not triggering capital gains taxes;
  • Interest rates for investment-secured loans are more attractive than common alternatives;
  • Interest accrues only when funds are actually borrowed;
  • Turnaround time on applications is expedient;
  • Payments can be structured in multiple ways, including monthly interest-only payments; and
  • Typically there is no cost to set up or close the loan or line of credit.

Contact your BB&T Wealth advisor to start a discussion about your current or future strategic credit needs.

About the Author

Clifton E. Clark

Clifton E. Clark

Senior Vice President, Wealth Lending Strategy Manager

Clifton joined BB&T Wealth in 2010 and serves as the BB&T Wealth Lending Strategy Manager. Clifton brings 10 years of corporate banking and wealth lending experience to his role. Clifton received his bachelor’s degree in economics from the University of Virginia and his J.D. and M.B.A. degrees from West Virginia University.