Mutual Fund Loans

Using Mutual Funds as Collateral for a Loan

If you are considering borrowing against your mutual fund shares, Trading Direct offers rock-bottom loan 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 through 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 List at Products & Services or contact Trading Direct customer service.
• 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.
• Any purchase of new mutual fund shares must be held for 30 days, before they can be margined.

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• In general, 50% of the mutual fund position may be withdrawn as a loan. For example, if you have 3 mutual funds worth $100,000 in your account, $50,000 may be withdrawn.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 standard margin agreement must be signed and submitted. (This form will be available during the new account opening process.
• 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 Interest Rates page for the rate table.
• In general, a margin call may be issued if your account falls below 30% of equity.

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 visit Open New Account, to submit an application.
• In order to transfer an existing mutual fund position, 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 with an account equity figure over $10,000.  Please visit the Cash Plus section of the Document Center for details.
• Please contact us with any questions: or telephone 1-800-925-8566 / 212-766-0230.

Disclaimer: Use of margin entails risk.  Leverage can also magnify losses. In order to open a margin account, a Margin Agreement must be signed.  Please read the Margin Agreement & Disclosure Statement carefully before submitting the form. Contact Customer Service with any questions.  Trading Direct, a division of York Securities Inc, is a discount broker who does not make any recommendations.  All orders are unsolicited.

Note: Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing.  To check this or any other information about a specific mutual fund, please request a prospectus from the fund company or Trading Direct, to read thoroughly before entering an order.