Example: An $800K UPS-based Line of Credit (LeverageLine) at 75% LTV for a Credit Line of $600K

December 19, 2018 5:53 AM

Prepayable Standard Variable Rate (30-Day LIBOR) LeverageLine

7.2
4.8
%
  • Retail vs ABN Rate
Examine stock portfolio interest rates for the LeverageLine credit line program.

Fixed Four Year Rate
No Prepay
LeverageLine

6.3
4.9
%
  • Retail vs ABN Rate

Fixed vs. Variable APR Rate LeverageLines

(Note: for more, read our blog post on Portfolio Loan Rates).There are some significant feature differences between our Fixed Rate LeverageLine and our Variable Rate LeverageLine. Please note carefully.Our standard figures are shown in the example above; but from time to time, we can offer special extra-low-rate fixed rates. Join our mailing list to be advised of new low-rate, limited-time specials.Let’s assume for purposes of illustration that you are pledging $800K worth of quality of securities (e.g., UPS or Apple stock in this example). Your maximum loan authorization is 75% for a single stock position (75% LTV — would be approximately 77-80% at least if the portfolio contained multiple stocks to spread collateral risk around). At 75%, which comes to a $600K line of credit, our ABN LTV is already the best in the market. The question now follows: Do you opt for a Fixed Rate LeverageLine based on one static rate for a set number of years (1-5 are offered); or do you select a standard Variable Rate LeverageLine based on 30-Day LIBOR rates, as most of our clients do since they can easily convert (at no cost) to a fixed rate line at any time?Normally, with fixed-rate lines, there are some drawbacks. First, you have to take all of your loan allocation and pay interest on all that amount right from the start normally;  but we at A. B. Nicholas have obtained agreement from your licensed lender adviser to permit a $600K loan/line of credit allocation, and our clients only are allowed to take as little as $250K and still fulfill the obligations of the fixed rate LeverageLine loan terms. (Typically, if the client’s loan authorization was only $250K, they’d pay a higher rate for the lower authorization – likely over 7.2 %). So from the start, our version of the fixed rate securities-based credit line saves our clients on interest immediately, while retaining choice.

The Fixed-Rate LeverageLine:

  1. Better interest for a fixed term through A. B. Nicholas than direct through any broker or financial advisor.Normally a licensed lender will require you to take all of your $600K line authorization at once, with a Fixed-Rate term loan. You can take as little as only $250K with our A. B. Nicholas LeverageLine even though you are authorized to take more.You’ll be required to pay back your line interest-only with a fixed LeverageLine. You may not prepay your principal with our Fixed-rate LeverageLine. You pay interest-only monthly, so no principal is payable until the actual end of loan (maturity).
  2. Your fixed-rate line of credit has a maturity date; at maturity, you may pay off the principal OR you may roll it into a new variable rate LeverageLine at no charge.
  3. You can convert your Fixed-Rate LeverageLine to a standard variable rate LeverageLine at any time at no cost, therefore, at the end of your loan term, if you’d rather not pay all of the principal back at maturity.

Variable-Rate (Standard) LeverageLine

  1. There is no requirement to take out any particular amount from your line authorization. In our $600K example, you could take $1 or $250K or all $600K. It is entirely up to you. . You can even take zero — nothing — and owe nothing, thereby treating your LeverageLine as a virtual “insurance policy.” 
  2. You are required to pay interest only on what you have drawn, but you can request to put your interest-only required payments into “deferral status” at any time t fold those forgone payments back into the loan principal.  So you don’t need to pay anything in any given month if you choose to defer. Simply ask your licensed lender adviser at your lending institution.
  3. This loan is prepayable: You can pay as much principal as you like at any time. 
  4. Want to pay off your line and exit it? With our standard Variable Rate LeverageLine you can to do so at any time. But with our Fixed-rate LeverageLine, you must wait until your line maturity date arrives to do so. .
  5. Your standard Variable-Rate line of credit has no maturity date. There is no balloon. There is therefore no set required date for payoff of principal.
  6. You can convert your standard Variable-Rate LeverageLine into into a Fixed-Rate LeverageLine at any time, at no cost. Simply ask your advisor. 

Offer the Leverageline Option
to Your Customers

Whether to invest in real estate, buy a vacation home, or supplement/replace your existing high-interest financing, LeverageLine can be the answer you’ve been looking for. And best of all? There’s no obligation or cost to apply! 

Speak to a stock loan specialist today

Note please: LeverageLine proceeds cannot be used to purchase more publicly traded, marginable stock, but can be used to purchase the stock of a non-publicly traded business enterprise (acquisition). Please read our disclaimer before proceeding. LeverageLine is not a residential mortgage nor is it intended to act as or replace a residential mortgage. 

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