Securities-Based Line of Credit: Rates, Repayment, and Margin Calls

A securities-based line of credit, or SBLOC, is a revolving loan that lets you borrow against the investments in your taxable brokerage account without selling them. Most lenders will advance between 50% and 95% of your portfolio’s market value, depending on what you hold.¹ You draw what you need, pay interest only on the balance you’ve actually borrowed, and set your own principal repayment schedule. The catch: SBLOCs are demand loans, so the lender can call the full balance at any time, and if your portfolio value falls, they can sell your holdings to cover the loan.²

What You Can Pledge as Collateral

Your investments have to sit in a taxable brokerage account. Retirement accounts like IRAs and 401(k)s cannot be pledged, because federal rules governing tax-advantaged savings prohibit it.¹ Within a taxable account, lenders generally accept common stocks, investment-grade corporate and municipal bonds, mutual funds, ETFs, and government securities. The assets need to be liquid enough that the lender could sell them quickly.

Composition matters as much as size. A portfolio heavy in a single stock will typically get a reduced advance rate on that position or be asked to diversify before approval. A well-diversified mix of blue-chip equities and highly rated bonds gets the most favorable treatment. Most firms require a minimum portfolio value of $100,000 or more just to qualify, and many set minimum initial draw amounts as well.¹

How Much You Can Borrow

Lenders assign a loan-to-value ratio to each asset class based on its volatility and liquidity. A typical SBLOC allows borrowing from 50% to 95% of portfolio value overall.¹ In practice, advance rates tend to fall in these ranges:

U.S. Treasury bonds and government securities: up to 90–95% LTV, because they carry minimal credit risk and trade easily.
Investment-grade corporate and municipal bonds: around 70–80% LTV.
Diversified equity portfolios and mutual funds: typically 50–70% LTV, reflecting price volatility.
Concentrated single-stock positions: often 30–50% LTV, or excluded entirely.

These ratios are set by the lender. For non-purpose credit like an SBLOC, there is no federally mandated LTV cap. That is different from a margin loan, where Federal Reserve Regulation T caps initial borrowing at 50% of the purchase price of equity securities.³ Your lender monitors the collateral value daily and adjusts your available credit as prices move.

Interest Rates and Fees

SBLOC rates are variable. The rate has two parts: a benchmark index (usually the Secured Overnight Financing Rate, or SOFR) plus a fixed spread set by the lender.⁴ SOFR moves daily with overnight lending markets.⁵ The spread varies by lender and loan size; at Fidelity, for example, it ranges from about 1.90% to 3.10%, with larger credit lines getting a lower spread.

Many lenders charge no application, origination, annual, or repayment fees on SBLOCs.⁴ The lender’s revenue comes from the interest spread, which is part of why wealth management firms market these products so heavily. Fee structures still vary, so check the terms at any institution you’re considering.

How Repayment Works

Once you draw on the line, you owe monthly interest-only payments on the outstanding balance. You are not charged interest on the unused portion. Principal repayment is on your own schedule; you decide when and how much to pay back, as long as you keep up with the monthly interest.⁶ If you never draw, you owe nothing.

There is no fixed maturity date. SBLOCs are demand loans, meaning the lender reserves the right to call in the full balance at any time, for any reason.² Lenders rarely do this to performing borrowers, but the legal right is spelled out in the credit agreement. If interest rates spike, your portfolio drops, or the lender changes its risk appetite, you could face a demand for full repayment on short notice.

What You Can and Can’t Do With the Money

SBLOCs are classified as non-purpose loans under Federal Reserve Regulation U, and that single classification drives the biggest restriction: you cannot use the proceeds to buy or trade securities.³ That means no funneling the cash into your brokerage account, no buying stocks with it, and no using it to meet margin calls on other positions.

Beyond that, the funds are flexible. Real estate purchases, tax bills, business operating costs, bridge financing between asset sales, personal expenses — all permitted. When the credit amount exceeds $100,000 and the loan is secured by margin stock, your bank will require you to sign Form FR U-1, attesting that the borrowed funds will not be used to purchase or carry securities.³ Nonbank lenders use a similar form called FR G-3. Compliance teams audit fund transfers to verify you’re following the rules, and a violation can result in immediate termination of your credit line.

Maintenance Calls and Forced Liquidation

This is where SBLOCs carry real risk that borrowers consistently underestimate. If the market value of your pledged securities falls below the level needed to support your outstanding balance, the lender issues a maintenance call. You then have a short window, typically two to three business days, to deposit cash, pledge more securities, or pay down the balance.¹

If you can’t meet the call, the lender can sell your securities to cover the shortfall. They can often do this without giving you any notice, and they choose which holdings to sell.¹ That means the lender might liquidate your most appreciated positions during a market downturn, when prices are already down. If the sale proceeds don’t fully cover the balance, you remain personally liable for the shortfall. The scenario that catches people off guard is a rapid market decline: the call arrives during the exact conditions that make it hardest to meet.

Tax Consequences

One of the main reasons people use an SBLOC is to access cash without triggering a taxable event. Borrowing is not income, so drawing on your line does not generate capital gains or income tax. If you hold highly appreciated stock you’d rather not sell, an SBLOC lets you tap the value while keeping your unrealized gains intact.¹

That picture changes if the lender forces a sale during a maintenance call. Any gains realized in the forced liquidation are taxable, and you don’t get to choose which lots are sold or when.¹ A forced sale of long-held stock can create a large capital gains bill on top of the financial stress that caused the call.

Interest deductibility depends on how you used the funds. If you used the proceeds for investment purposes, the interest qualifies as investment interest expense, deductible up to the amount of your net investment income for the year, with unused deductions carried forward. If you used the money for personal expenses, the interest is generally not deductible. Mixed-use borrowing requires you to allocate interest between deductible and non-deductible portions based on how the funds were actually spent, regardless of what collateral secures the loan.⁷

How an SBLOC Differs From a Margin Loan

People frequently confuse the two because both involve borrowing against a brokerage account. The differences are structural and regulatory.

Purpose of the loan. A margin loan is specifically for buying more securities. An SBLOC can be used for almost anything except buying securities.¹
Governing regulation. Margin loans fall under Regulation T, which caps initial borrowing at 50% of the purchase price of equity securities. SBLOCs fall under Regulation U, which restricts purpose credit but imposes no specific LTV cap on non-purpose loans.³
Leverage limits. Because SBLOCs aren’t subject to Regulation T’s 50% cap, lenders can offer higher LTV ratios, up to 95% for high-quality bonds.¹
Account portability. With a margin loan, you can generally transfer your brokerage account to another firm. With an SBLOC, your assets are pledged as collateral, and you’ll typically need to pay off the entire loan before you can move them.¹

The portability point is worth pausing on. Once your account secures an SBLOC, switching to a competitor offering better rates or service means paying off the loan first. Some wealth management firms use SBLOCs partly for this reason, because it makes clients stickier.

How to Apply

Applying for an SBLOC involves more paperwork than opening a brokerage account but less than a mortgage. You’ll typically need:

Recent brokerage statements. At least three months, showing holdings, account numbers, and current market values.
Government-issued identification. A valid driver’s license or passport for Know Your Customer requirements.
Tax documentation. Recent W-2s or federal tax returns so the lender can assess your overall financial position.
Entity documents, if applicable. If the securities sit in a trust or business entity, you’ll need trust agreements, articles of incorporation, or similar organizational documents.

The borrower and the owner of the pledged securities don’t have to be the same person; if someone else’s account secures your line, additional documentation identifies both parties. Applications typically go through the brokerage’s online portal or a dedicated lending representative. Underwriting usually takes five to ten business days, during which the lender verifies your collateral, reviews your credit history, and sets your LTV ratios and credit limit. After approval, you sign the credit agreement electronically and the lender links your securities account to a designated bank account for transfers. From there you can draw funds through an online dashboard or by contacting the lending team.

1
FINRA. Securities-Backed Lines of Credit Explained
2
Board of Governors of the Federal Reserve System. Estimating Securities-Based Loans Outstanding
3
eCFR. 12 CFR Part 221 – Credit by Banks and Persons Other Than Brokers or Dealers for the Purpose of Purchasing or Carrying Margin Stock (Regulation U)
4
Fidelity. Securities Backed Line of Credit
5
Federal Reserve Bank of New York. Secured Overnight Financing Rate Data
6
Fidelity. What Is a Securities-Backed Line of Credit
7
Internal Revenue Service. Publication 550, Investment Income and Expenses