Life happens. At some point, you might need quick cash for a down payment or to cover an unexpected expense, but may not be sure whether it warrants raiding your emergency savings.
You could sell some of your investments, but depending upon the market, it might not be the best time to take profits.
But there's another option to consider: using your brokerage account for financing.
Having a securities-based line of credit, or SBLOC, could provide you with access to cash so you can grab an investment opportunity or make ends meet when you're stuck in a jam.
Here's an example: Let's say you're surprised with a sudden high tax bill and would rather not empty out your savings or sell stock to pay it. You also know that your annual work bonus is coming up in a few months. You could tap into your SBLOC to bridge the gap for now, paying the loan off once your bonus hits your checking account.
SBLOCs use your taxable brokerage account as collateral to back a revolving line of credit. This means you can choose how much to borrow and pay back without having set payments over a defined period of time.
To qualify, brokerage firms offering this lending solution may require a certain account balance and will calculate the maximum credit available to you — the collateral value — based on the eligible securities (generally stocks and bonds) within your account.
With the volatility of the market, you won't be given a dollar-for-dollar loan, says Tolen Teigen, certified financial planner and chief investment officer at FinDec, a financial consulting company headquartered in Stockton, Calif.