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DEFINITION of 'Non-Purpose Loan'

A type of loan that uses an investment portfolio as loan collateral and the proceeds of which cannot be used to purchase, carry or trade securities. This type of loan allows investors access to funds without having to sell their investments. Regulations require financial institutions to disclose whether a loan is a non-purpose or purpose loan, and borrowers are required to indicate the purpose of the loan.

BREAKING DOWN 'Non-Purpose Loan'

With a non-purpose loan, investors continue to receive the benefits of their portfolio holdings, such as dividends, interest and appreciation. If the value of the pledged securities declines, however, the lender may require that additional securities be put up as collateral or that part of the loan be repaid to make up for the decrease in collateral. This type of borrowing is considered an alternative to traditional margin borrowing because it allows multiple investment accounts to be used to secure a loan.

Sources: Investopedia

 

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Securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and a Registered Investment Adviser. Fulcrum Wealth Advisors, LLC is a state of Washington Registered Investment Advisory firm. Cetera is under separate ownership from any other named entity. Investment Advisory services are offered through Fulcrum Wealth Advisors, LLC.  Fulcrum Wealth Advisors, LLC is a registered Investment Advisor in the State of Washington.

10940 NE 33rd Pl., Suite #210, Bellevue, Washington 98004 United States

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Fulcrum Wealth Advisors, LLC is a registered investment adviser in the State of Washington.  The adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Individualized responses to persons that involve either the effecting of transactions in securities or the rendering of personalized investment advice for compensation will not be made without registration or exemption.   

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