Most people borrow during the course of their lives. But it’s important to be as strategic about borrowing as you are with the other areas of your financial life.
Let’s be honest: many people borrow as part of their financial plan. They borrow to renovate homes, pay taxes and finance personal interests. They also borrow to finance businesses, education costs or other needs.
For some larger acquisitions such as these, borrowing in one lump sum isn’t always feasible. As a result, over time people often end up with a cumbersome mix of mortgages, home equity loans, student loans, credit cards, and personal loans.
This piecemeal approach to borrowing can result in suboptimal loan structures and pricing, which may create challenges with matching cash flows and debt service requirements. Furthermore, taking an uncoordinated approach to borrowing can impede your ability to stay the course of a well-thought-out investment strategy.
Periodically reviewing your debt structure may:
- Reduce interest costs
- Enable more rapid repayment of debt
- Offer an additional source of liquidity for unexpected cash needs
- Better align the timing of sources and uses of cash
When it comes to taking a more strategic approach to debt management, one of the most powerful resources at your disposal is your investment portfolio.
When it comes to taking a more strategic approach to debt management, one of the most powerful resources at your disposal is your investment portfolio. Using your investments as collateral for a securities based loan may provide you with convenient and competitively priced access to funds that can be used to consolidate many different loans into a single line of credit.
Unlike other forms of debt that have fixed repayment schedules and charge late payment fees, securities based loans gives you control to choose how you want to repay the loan. As long as you have sufficient availability, you can pay principal or interest or allow interest to be added to the principal. Also, because a securities based loan is a line of credit, it can be used whenever future large purchases or unforeseen events occur, without requiring a new application.
Securities based lending may also offer you a potentially lower rate than other forms of debt, including unsecured loans and credit cards. A lower interest rate may enable you to pay down debt more quickly and better manage cash flows so you can use available funds for other purposes.
Borrowing against securities may provide additional benefits, including the potential to keep assets invested to help you stay on track towards your investment goals, as well as helping to avoid triggering tax consequences associated with selling appreciated investments.
Since debt is an important part of your financial picture, managing it requires a strategic approach. Contact your Morgan Stanley Financial Advisor, who with the support of your Morgan Stanley Private Banker, can help you take a holistic look at your liabilities and help you evaluate all of your borrowing options, including a securities based loan that may help you consolidate your debt and manage it more efficiently.
Borrowing against securities may not be suitable for everyone. You should be aware that there are risks associated with a securities based loan, including possible maintenance calls on short notice, and that market conditions can magnify any potential for loss. For details please see the important disclosures below.