Track 5 of 25

The securities-backed line itself

The eight terms that move without you, one lesson each, then how a reset appears on a statement, how to recompute an interest leg by hand, and what to ask your own lender.

20 lessons

Mark a lesson complete and it is remembered here.

Term one: the line is payable on demandThe facility has no fixed maturity, so repayment can be required without any failure on your part.6 min
Term two: the rate is variable and can move on its ownThe interest rate can change without any matching change in your stated borrowing capacity.6 min
Term three: the lender sets collateral valueCollateral value is the lender's determination, including haircuts, eligibility and concentration limits.6 min
Term four: advance rates are assigned and can be revisedAdvance rates are policy, not contract terms, and they can be changed at the lender's discretion.6 min
Term five: a maintenance threshold governs the callOne stated level decides when additional collateral or repayment can be required.6 min
Term six: the lender may sell pledged securitiesThe remedy for a shortfall is a sale the lender executes, choosing what goes and when.6 min
Term seven: notice is a courtesy, not a rightA cure window may be offered, and the agreement typically also permits action with no prior notice.6 min
Term eight: your other agreements can reach this lineOther relationships with the same institution can affect this facility, through cross-references you did not negotiate separately.6 min
What a securities-backed line is, and who offers themA credit facility secured by a pledged brokerage account, offered by banks, brokerages and their affiliates.6 min
Typical minimums across the marketMinimums cluster in bands, and the band you fall into changes the terms more than the rate.6 min
How a rate reset actually appears on a statementUsually as a single rate at the top of the page, describing only the rate in force at the end.7 min
A rate change is not a capacity changeTwo independent numbers govern a line, and a change in one implies nothing about the other.6 min
Why a backward-effective revision is possibleA term can be revised with effect from a date already past, producing a charge for a period you thought was settled.7 min
What a prior-period adjustment isA line correcting an earlier period, and often the only visible trace that a term was revised.6 min
How to recompute an interest leg by handFour inputs, one loop, one comparison. It takes ten minutes and it is the only way to verify a charge.8 min
How to check a balance chainOpening balance plus draws minus repayments plus interest should equal the closing balance, exactly.7 min
What a lender must disclose, and what it need notDisclosure obligations cover the terms and the charges, and generally not the lender's own risk view of you.7 min
Why the collateral lending value is usually not printedIt is a live computation, not a fact about a period, so a periodic statement is the wrong instrument for it.6 min
Auto-pay from a pledged account, and the feedback loopPaying interest out of the collateral shrinks the collateral, and the amount sold is largest in the worst markets.7 min
What to ask your own lenderEleven questions, each with a factual answer, none of which requires anyone's opinion.8 min

Educational only. Nothing in this track is investment, legal or tax advice, or a recommendation to enter into any transaction. Completion is stored in this browser and nowhere else.