A Lombard loan will allow you to borrow against deposited assets with a lender up to a certain percentage of their respective market values. These lending value percentages, which ultimately affect the maximum amount of credit you can receive from the lender, depend on the level of risk involved in the financing agreement, and the type of securities you’re putting forward as collateral. This kind of finance agreement is a highly flexible and attractive solution, for those who wish to take advantage of a useful leverage effect to access a convenient source of liquidity.
When you take out a Lombard credit agreement, you’ll receive additional capital without having to sell your existing securities, which is ideal if you want to continue to take advantage of the increase in value and earning potential of your assets while also having the flexibility to explore further investment opportunities outside of your current portfolio.
With Lombard loans, the risk to the lender is lower than with a typical loan agreement because the company will have access to saleable assets in the case of non-payment. This means that banks and specialist lenders will usually provide lower interest rates on Lombard finance agreements compared to those offered on credit cards and consumer loans.
However…
If the value of the securities that are held as collateral drops, you, as the borrower, may be asked to ‘top up’ your assets to meet the lender’s criteria. If you cannot do so, the lender may be entitled to sell a proportion of the initial assets to reduce the loan amount. This is why it’s always important to review the security of the market that the assets are in.
At CBM Financial Partners, we always encourage our clients to seriously consider the implications of committing to a Lombard loan, and assess whether or not they could afford to make suitable repayments if they experience a shortfall caused by market volatility.
Remember, too, that we also cater for international clients earning in foreign currencies. You do not necessarily need to be living and earning in the UK in order to find a suitable Lombard loan.