• Wealth Management

How Do You Plan to Pay Your Tax Bill?

A securities based loan is another potential option to help you satisfy your tax obligation in 2017.

In the early 20th century, the U.S. government began relying on taxpayers to set aside cash reserves throughout the year and then make a single payment for taxes due.1

Although a lot has changed since 1913, one thing that hasn't changed is the process of coming up with funds to pay the yearly tax bill. When you are evaluating how to fund your April 18th tax payment, you have a range of potential options that may include:

  • Paying in cash. Straightforward—but may drain your cash reserves.
  • Liquidating investments. Could have drawbacks such as taxes on capital gains, a missed opportunity for future asset growth, or possibly creating an asset allocation imbalance in your portfolio.
  • Using a credit card. May allow taxpayers to earn card rewards on the amount they pay. However, the fees incurred could be higher than the value of frequent flier miles, points, or cash back gained.²
  • Taking a traditional bank loan. May require a lengthy application process and extensive paperwork, as well as incurring additional costs.

However, there is another potential option that may help you satisfy your tax obligation this year…

A Securities Based Loan—Is It Right for You?

If you qualify, a securities based loan allows you to use eligible securities in your Morgan Stanley brokerage account(s) as collateral for a line of credit that you can use for a variety of needs (except to purchase or trade securities). Because your investments are not liquidated, as long as the required level of collateral is maintained, you may be able to preserve the growth potential of your portfolio and reduce the chance of having an asset allocation imbalance. An SBL may allow you to meet short-term financing needs while preserving your longer-term wealth management strategy.

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 at the end of this article.

The Advantages of a Securities Based Loan

Benefits of choosing a securities based loan:

  • Simple application process. Credit decisions are typically made in 1–2 days
  • Once approved, quick access to funds via check, wire or online
  • Competitive floating or fixed rates3
  • Typically no fees4
  • Flexible repayment options

In addition to tax obligations, securities based loan proceeds can be used for a variety of other reasons and may offer you considerable flexibility. Securities based loans may provide you with quick and efficient access to funds for:

  • Purchasing real estate
  • Education expenses
  • Business expenses
  • Debt consolidation
  • General liquidity needs

Speak with your Financial Advisor or Private Wealth Advisor (and your tax and legal advisors) about using a securities based loan to pay for your taxes or for other expenses, and for help with determining if a securities based loan may be an option to consider.