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When expenses come up, planned or otherwise, it may be tempting to sell investments or tap into your emergency fund to cover them. However, you might want to consider this often-overlooked option: Using a margin loan as a personal line of credit.
This solution may make sense when you have short-term needs like:
Instead of borrowing from a bank, you borrow from Edward Jones, using the wealth you've created. The securities in your account serve as a source of collateral for the loan. Depending on the eligibility of the account, you may be able to borrow up to 50% of the value of your eligible non-retirement investments.
A personal line of credit could help keep your long-term investment strategy intact. It allows you to retain ownership of your investments and potentially avoid tax consequences of selling investments. Plus, there's no underwriting required or impact on your credit score.
A personal line of credit may not be the solution for everyone. As with any loan, there are risks involved. Ask your financial advisor if this might be the right strategy for you.
Our Personal Line of Credit is a margin loan. Investing on margin or using a margin loan involves risk and is not appropriate for everyone. You can lose more funds than you deposit in the margin account. If the value of the securities in your margin account declines, you may be required to deposit cash or additional securities. In the event of a margin call, the firm can sell securities or other assets in your accounts and can do so without notice to you. You may not be entitled to choose which securities or other assets in your accounts are liquidated or sold to meet a margin call. The firm can increase its maintenance margin requirements at any time and/or not grant an extension of time on a margin call. Interest will begin to accrue from the date of the loan and be charged to the account. Available only on certain types of accounts.