How the Wealthy Borrow Cheap Cash

How the Wealthy Borrow Cheap Cash Episode 244 – When they’re facing a significant expense, the wealthy have a special technique they use to access cheap cash. More SML Planning Minute Podcast Episodes Transcript of Podcast Episode 244 Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode: How the Wealthy Borrow Cheap Cash. Even the wealthy need to raise cash from time to time. A big tax bill, a major purchase, a wedding, or a college tuition payment are just some of the reasons. But they often do something that most people can’t: They borrow against their investment portfolio. Let’s take a quick look at what some large investment account holders do. Programs vary from one bank, or investment advisory firm, to another, but investors with large portfolios can generally borrow at least 50% of their total account value. In fact, interest rates on these types of loans are generally lower than the rate on a personal loan or a home equity line of credit. In effect, this type of loan allows a borrower to leverage their portfolio, using their securities as collateral, without having to sell their investments. Thus, they can raise cash without the transaction fees or capital gains taxes that may be due when selling some of their securities. Does a securities-based loan make sense? The answer is: Sometimes. It only works well if you make more money on the investments than the interest rate you would pay on the loan. This is certainly not fo