A Lombard Loan involves using financial instruments, like marketable securities, as loan collateral. Just like a property is used as collateral when you take out a mortgage, different liquid assets can be utilised as loan security. In exchange for a pledge of your liquid securities, such as investment funds, bonds, or equities, you can request the lender provides you with a credit line that you can use at any time throughout a pre-agreed period. In this manner, Lombard Loans give you the ability to boost your liquidity in a flexible way without needing to sell your securities.
There are many different benefits associated with Lombard Loans, and an experienced mortgage broker can help to make sure that this is the right solution for you. From the great flexibility and ensuring you have a line of credit accessible to you when you require it, there are many reasons why these types of loans make sense.
How do Lombard Loans work?
This type of lending is relatively short-term, with the period of lending ranging from one week to two years. Lombard Loans tend to be offered by financial institutions as a percentage of the value of the securities you hold. Nevertheless, the assets or investments the borrower pledges to the lender must be able to be liquidated with ease. Typically, Lombard Loans can be accessed by an individual who has a minimum of £100,000 in their investment portfolio. Of course, the terms are going to differ from company to company but this is something important to keep in mind.
The benefits of taking out a Lombard Loan
There are a number of different benefits associated with these types of loans. Underwriting is typically limited to the collateral utilised as security for the loan so there are non of the issues associated with affordability of a mortgage loan. As a consequence, it is an efficient option; you can access capital fast, which suits situations where funds are required urgently.
Selling underlying assets or securities can have an impact on your financial situation as a whole, for instance, it can result in quite considerable changes to the tax you pay. If you are forced to sell securities before the opportune moment arises or before you want to because you need to create liquidity, this can mean you miss out on the upsides of the asset in the future, as it pays you dividends or grows.
With a Lombard Loan, you have a flexible and efficient alternative to selling securities. It enables you to maintain the long-term benefits of asset ownership so that you can avoid any of the unwanted monetary repercussions that come with selling your securities while still being able to access all of the capital that you require.
If you want to respond to an unanticipated opportunity that has come your way but you do not have the cash required, a Lombard Loan can be an ideal solution. Lombard loans can also be a wise choice if you have a liquidity challenge or issue that you must solve quickly and you do not want your securities to be sold.
