Line of Credit
What is a Line of Credit?
It's a flexible source of ready cash for virtually any personal or business financing need.* Use it for real estate purchases, home remodeling, business expenses, tax obligations, and more.
Apply online in minutes. Once approved, cash is typically deposited into your designated bank account within two business days.
Plus, all documents can be quickly signed online.
Typically no fees
There are typically no set-up costs and no late payments. You only pay interest if you borrow, and you can cancel at any time without charge.5
Repay on your schedule online or by check5, or set up autopayments. Even defer payments with the interest automatically rolling into the principal balance.
* NOTE: Proceeds may not be used to purchase securities or repay margin loans. Borrowing against securities may not be appropriate for everyone. You should be aware that there are risks associated with a securities based line of credit, including possible maintenance calls on a short notice, and that market conditions can magnify any potential for loss. For details, see important disclosures below.
Access cash at competitive interest rates
|Your Maximum Eligible Credit Line||Variable APR4|
|$10,000,000+||7.786% (Index* + 2.25%)|
|$5,000,000 - $9,999,999||8.040% (Index* + 2.50%)|
|$2,500,000 - $4,999,999||8.293% (Index* + 2.75%)|
|$1,000,000 - $2,499,999||8.547% (Index* + 3.00%)|
|$500,000 - $999,999||9.053% (Index* + 3.50%)|
|$65,000 - $499,999||9.560% (Index* + 4.00%)|
|< $65,000||10.828% (Index* + 5.25%)|
How to calculate the index:
The Line of Credit uses a Variable Rate Adjustment that has been selected or recommended by the International Swaps and Derivatives Association Inc. (ISDA). However, the full ISDA-recommended Variable Rate Adjustment (0.11448%) will be phased in over time. Rather than a one-time adjustment, this transition will be done with a series of adjustments that began on September 20, 2021, and will conclude in July 2023.
Revised Variable Rate Adjustments
|Date||SOFR Rate Index||Variable Rate Adjustment|
|7/10/2023||30-day average SOFR plus||0.11448%|
What are the risks of a Line of Credit?
Securities-based lending involves special risks and is not appropriate for everyone. Be sure to carefully review product details, risks, and benefits to ensure this product is right for you.
- A decline in the value of your pledged collateral may require you to provide additional funds or securities to avoid a maintenance call.
- You can lose more funds than are held in the collateral account. A Line of Credit account is a full-recourse loan and you will be held liable for any deficiency.
- Morgan Stanley Private Bank can force the liquidation of any securities pledged as collateral, and can do so without contacting you first. You are not entitled to choose which securities in the collateral account are liquidated.
- Morgan Stanley Private Bank can modify its collateral maintenance requirements at any time, without notice to you.
- You are not entitled to an extension of time to resolve a maintenance call.
- If your assets are liquidated, there may be adverse tax or other consequences.
- A Line of Credit is an uncommitted demand facility, which means the bank may demand full or partial repayment at any time or elect not to advance funds.
How is a Line of Credit different from margin borrowing?
A Line of Credit is different in two ways: (1) the way in which the funds are used, and (2) the interest rates on the Line of Credit.
- How the funds are used:
- For a Line of Credit, funds can be used for any lawful purpose, except for the purchasing, carrying, or trading of margin stock or repayment of a margin loan.
- Margin can be used for any lawful purpose, including the purchasing, carrying, or trading of margin stock.
- Interest rates:
- A Line of Credit is tied to the 30-day rolling compounded average Secured Overnight Financing Rate (SOFR), as published by the Federal Reserve Bank of New York, plus a variable rate adjustment, plus a margin.
- Margin interest rates are typically tied to the E*TRADE Base Rate, which is set at the discretion of E*TRADE with reference to commercially recognized interest rates. Margin interest rates may move with changes in the E*TRADE Base Rate, or with adjustments in the debit balance.
What account types are eligible to be pledged as collateral for a Line of Credit?
Non-retirement and non-stock plan accounts including individual, joint, and revocable trusts with no more than two trustees may be pledged as collateral.
Are there restrictions on my account(s) once pledged as collateral for a Line of Credit?
Yes, there are restrictions on accounts pledged as collateral:
- No margin borrowing. Funds cannot be used for purchase, carrying, trading of margin stock, or repayment of a margin loan.
- No margin and options trading. Upon being approved for a Line of Credit, the collateral account(s) will have margin and options trading capabilities removed (if applicable). Pledged accounts will also be prohibited from enrolling in margin and/or options trading.
- Cash management and payment features disabled. Upon taking a draw from your line of credit, all cash management and payment features will be restricted (e.g., bill pay, check writing, use of debit card, electronic funds transfers, wires).
If you would like to withdraw cash and/or securities from a pledged account, please call us at 800-387-2331 for assistance.
What happens if market fluctuations lead to a decline in collateral account value?
In this situation, you may be required to deposit additional cash or securities as collateral to maintain your original collateral amount. Failure to do so may result in the selling of some or all of your pledged securities, which may result in adverse tax consequences.