Mutual Fund Loan
Using Mutual Funds as Collateral for a Loan
If you are considering borrowing against your mutual fund shares, Trading Direct offers rock-bottom loans rates, with the convenience of an online brokerage account. You will not be taking out a loan directly from the mutual fund company itself, but from Trading Direct, a division of York Securities. You will still be the owner of the mutual fund, but rather than holding the shares in an account directly with the mutual fund company or other financial firm, they will be held in your account with Trading Direct. The mutual fund shares may then be used as collateral for a loan.
Which mutual funds can be used as loan collateral? Are there any restrictions?
- Make sure your particular mutual fund is carried by Trading Direct. Please check the Mutual Funds Main Page, or contact Trading Direct customer service:
- If buying new mutual funds shares through Trading Direct, they must be held at least 30 days before they can be used as collateral for a loan (held in a margin account).
- If you already own mutual funds directly with the sponsor or another brokerage firm, they can be transferred to and held in your Trading Direct account. Once in your account, they can be margined (used as loan collateral) immediately, as long as they were purchased at least 30 days ago.
What are the terms of the loan?
- In general, 50% of the mutual fund position may be withdrawn as a loan. For example, if you have 3 mutual funds worth $100,000 in your account, $50,000 may be withdrawn.
- A margin call may be issued if your account falls below 30% of equity.
- While there is no set repayment date on the loan, interest will be charged monthly and added to the outstanding loan balance.
- The rate of your loan will depend on the amount borrowed. Please visit the Trading Direct Homepage for the rate table.
- A standard margin agreement must be signed. (This form will be available during the new account opening process.)
How do I open an account or transfer mutual fund shares?
- If you have not yet opened a margin account with Trading Direct, please first click on “Open An Account” from the Trading Direct Home Page.
- After your account has been opened, fill out the Account Transfer form, and then fax or mail to Trading Direct, who will initiate the transfer process with the other firm.
What else is there to know?
- If you are interested in check writing or a Visa branded debit card, these services are available free of charge with an account equity figure over $50,000. Please visit the Valet page for details.
- Please contact us with any questions: info@tradingdirect.com or telephone 1-800-925-8566 / 212-766-0230.
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Questions? Contact us.