Many of us think that natural disasters always happen to other people in other areas like the ones we hear on the news. However, this mindset can leave us totally unprepared if a natural disaster does occur in our community and our personal properties are affected. Moreover, the likelihood of a catastrophic event taking place is greater on our part of the country, where Hurricanes are quite common.
Instead of having to wait for claim settling, an alternative option to cover you and your family after a natural disaster is to have a Securities Based Line of Credit in your investment account. Usually, people use this Line of Credit for making large purchases, supporting businesses, consolidating debt, paying taxes, etc. However, they can also be used to pay for cleanup and repair after flooding, fallen trees on your roof, damaged vehicles, water damage and more. In extreme cases major reconstruction takes months, and if you add on top of that the time insurance companies take in general to settle the claim, it could take up to a year for full recovery of your properties. Also, not all insurance companies cover all losses that arise from these events.
A Securities Based Line of Credit allows for those repairs to be made sooner; it essentially allows you to borrow against your investment assets at competitive rates without having to liquidate the positions you hold. This provides the opportunity to continue to keep your money invested and allow it to potentially grow while taking care of an urgent financial need. It may also help relieve stress in times of anxiety with less disruption of your future goals and investment strategies you have already put in place. A Line of Credit’s main purpose can be summed up in three words: just in case. And there are times it can be a lifesaver.
Prudence would tell us not to wait until after the storm has passed to set-up your Line of Credit as it could lead you to another storm of stress, urgency, and uncertainty. Why not start now by setting up a Securities Based Line of Credit with Raymond James Bank backed by the assets in your (non-retirement) accounts? There is no cost until you actually start to borrow from the account and incur interest at that time. You’ll be able to access capital quickly for short-term cash needs and for potential future needs. It’s always better to have a plan and not need it, than to need it and not have one at all.
A Securities Based Line of Credit (SBLC) may not be suitable for all clients. The proceeds from an SBLC cannot be used to purchase or carry margin securities. Raymond James Bank does not accept RJF stock as pledged securities towards an SBLC. Borrowing on securities based lending products and using securities as collateral may involve a high degree of risk including unintended tax consequences and the possible need to sell your holdings, which may lead to a significant impact on long-term investment goals. Market conditions can magnify any potential for loss. If the market turns against the client, he or she may be required to quickly deposit additional securities and/or cash in the account(s) or pay down the loan to avoid liquidation. The securities in the Pledged Account(s) may be sold to meet the Collateral Call, and the firm can sell the client’s securities without contacting them. A client is not entitled to choose which securities or other assets in his or her account are liquidated or sold to meet a Collateral Call. The firm can increase its maintenance requirements at any time and is not required to provide a client advance written notice. A client is not entitled to an extension of time on a Collateral Call. Increased interest rates could also affect LIBOR rates that apply to your SBLC causing the cost of the credit line to increase significantly. The interest rates charged are determined by the market value of pledged assets and the net value of the client’s Capital Access account. Securities Based Line of Credit provided by Raymond James Bank, N.A. Raymond James & Associates, Inc. and Raymond James Financial Services,Inc. are affiliated with Raymond James Bank, N.A., a federally chartered national bank. Raymond James does not offer tax advice. Please consult your tax advisor for questions regarding your tax situation.