Unlike a one-time loan taken out for a specific purpose, a non-purpose securities-backed line of credit can provide a steady source of funds that allows you to borrow what you need when you need it. There are no interest or fees until you use it, and you can be prepared for unexpected liquidity needs.
Repayment methods tend to be flexible as well, Knake adds. Some clients opt to make recurring monthly interest payments systematically. Others may tie repayment to a future cash flow event and capitalize the interest. In addition, clients may opt to lock in the interest rate for up to 10 years. Fixed-rate contracts can help diversify interest rate risk; however, they are subject to prepayment fees. “Selecting the right repayment schedule and loan type really depends on the client's need,” Knake says. You and your UBS Financial Advisor can discuss which option might best serve you and your wealth management plan.